Utilities Essay

Chesapeake Utilities Corporation and Florida Public Utilities

Chesapeake Utilities Corporation and Florida Public Utilities

Investors are in the business of making money. A good way for investors to make money is to invest in the stock of companies that show promise in growth. Another way to make money is by way of mergers or acquisitions because mergers and acquisitions produce several synergies. While mergers and acquisitions provide attractive money-making opportunities to investors, they also provide many risks that could cause investors to lose money. This paper discusses opportunities and risks presented to investors during the 2009 merger of Chesapeake Utilities Corporation and Florida Public Utilities and the merger’s effects on both companies’ existing customer base and stockholders, the potential sources of synergy, and the merger’s success or failure.

The Merger

Chesapeake Utilities Corporation was started as Dover Gas Light Company in 1859. It was incorporated as Chesapeake Utilities Corporation in 1947. Before merging with Florida Public Utilities in 2008, Chesapeake Utilities Corporation had acquired 11 other utility-related companies from 1980 through 2008. The merger was completed in 2009 and resulted in the creation of a combined energy company that would serve 200,000 customers in the Mid-Atlantic and Florida markets (chpk.com, 2009). Because of the related business services and close geographic location of the utility companies, the merger had potential to produce various synergies.

Although there are many factors used to determine the price to pay for a merger and acquisition, some which were publicly disclosed in the merger between Chesapeake Utilities Corporation and Florida Public Utilities include the growth potential in the industry, the leadership background of its management, and other synergies created. Specifically, the merger was intended to qualify as a tax-free organization (tradingmarkets.com, 2009). It is likely...