Hydro One Limited (TSX:H) entered into a definitive merger agreement to acquire Avista Corporation (NYSE:AVA) for $3.4 billion on July 19, 2017. Under the terms of deal, Hydro One will acquire all of the issued and outstanding shares of Avista for $53 per share in cash. Each restricted stock unit outstanding, each performance award outstanding would be entitled to $53 in cash. As of the effective time, all dividends declared by Avista with respect to shares of Avista common stock, and all dividend equivalent payments relating to restricted stock units and performance awards that have been accumulated or retained by Avista until the vesting or settlement of such awards shall automatically become fully vested and paid to the holders of such restricted stock units and performance awards. The consideration is subject to adjustments in certain circumstances. Hydro One's acquisition financing strategy involves the issuance of CAD 1.4 billion ($1.1 billion) of Hydro One common equity and $2.6 billion of Hydro One debt. Hydro One has concurrently executed a bought deal financing for net proceeds of CAD 1.4 billion ($1.1 billion) consisting of contingent convertible debentures represented by installment receipts to satisfy the equity component of the acquisition financing strategy. The aggregate principal amount of 4.00% convertible unsecured subordinated debentures, first installment and the final installment is CAD 1.54 billion ($1.2 billion). Hydro One is drawing funds under the existing CAD 250 million ($198.5 million) operating credit facility, existing cash on hand and and other sources available to Hydro One to finance the transaction. Avista will operate as a wholly-owned subsidiary of Hydro One. Avista will continue to operate under the Avista name. In the event of termination Hydro One will pay a termination fee of $103 million to Avista. In the event, Avista terminates the deal, it will pay a termination fees of $103 million.

Avista will have same management team and existing employees in place, overseen by a Board of Directors with significant Pacific Northwest representation. Scott Morris, current Board Chair, President and Chief Executive Officer of Avista, will serve as Chairman of the Board of Avista. Five members of Board of Directors of the surviving corporation will designated by Hydro One which includes Mayo Schmidt. The Board of Directors of the surviving corporation will consist of nine members in total consisting of two Directors designated by the sole shareholder of the surviving corporation, three Directors who are not officers, employees or Directors of Hydro One or any of its affiliates and who are residents of the Pacific Northwest region, to be designated by the sole shareholder of the surviving corporation, three Directors who, as of immediately prior to the effective time, were members of the Board of Directors of Avista, including the Chairman of Avista's Board of Directors, and the Chief Executive Officer of the surviving corporation decisions with respect to certain operational matters. Following completion of the transaction, Avista will maintain its existing headquarters in Spokane and will continue to operate as a standalone utility in Washington, Oregon, Idaho, Montana and Alaska. After the completion, Avista will no longer be publicly traded on the NYSE. The combined company's headquarters will be based in Toronto.

The deal is subject to the satisfaction or waiver of specified closing conditions, Avista common shareholder approval, certain regulatory and government approvals and clearances including approval by the Washington Utilities and Transportation Commission, the Public Utility Commission of Oregon, the Idaho Public Utilities Commission, the Regulatory Commission of Alaska, the Public Service Commission of the State of Montana, the U.S. Federal Energy Regulatory Commission, Federal Communications Commission, clearance by the Committee on Foreign Investment in the United States (CFIUS) and compliance with applicable requirements under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, approval by the Board of Directors of both Hydro and Avista, and the satisfaction of customary closing conditions. The transaction was unanimously approved by the Boards of Directors of both companies and recommends shareholders to vote for the approval of the transaction.

On November 21, 2017, Avista Corp. shareholders approved the transaction. On January 16, 2018, Hydro One and Avista Corporation received approval from the Federal Energy Regulatory Commission on the merger application filed on September 14, 2017. As of March 16, 2018, Hydro One and Avista have reached a significant milestone in the regulatory approval process of the proposed merger. Notification of a settlement in principle with various parties has been filed with the Washington Utilities and Transportation Commission (WUTC) on March 27, 2018. The settlement in principle is subject to the review and approval of the WUTC. On April 3, 2018, Hydro One, Avista and the City and Borough of Juneau reached a settlement agreement in the merger proceeding before the Regulatory Commission of Alaska. On April 5, 2018, the transaction received antitrust clearance after the expiration of the waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act. As of April 13, 2018, Hydro One and Avista have filed an all-party settlement agreement in the merger proceeding before the Idaho Public Utilities Commission. As of May 4, 2018, the transaction was approved by Federal Communications Commission. On May 18, 2018, the Committee on Foreign Investment in the United States (“CFIUS”) completed its review of the transaction, and concluded that there are no unresolved national security concerns with respect to the transaction. As of May 25, 2018, Hydro One and Avista filed all-parties, all-issues settlement agreement in the merger proceeding before the Public Utility Commission of Oregon (OPUC). The settlement agreement is subject to review and approval by the OPUC. As of June 4, 2018, Hydro One and Avista received approval from the Regulatory Commission of Alaska for the proposed merger subject to the certain conditions. As of June 12, 2018, the transaction was approved by the Montana Public Service Commission. On December 5, 2018, The Washington Utilities and Transportation Commission denied approval for the transaction. As on January 3, 2019, Idaho Public Utilities Commission denied approval for the transaction. The transaction is expected to close in the second half of 2018. As per the announcement on July 11, 2018, pending the resignation of Board of Directors of buyer and immediate retirement of Chief Executive Officer and President, the regulatory authorities have extended the time for arriving at the decision of the acquisition to mid December 2018. Both the parties continue to expect to close the transaction in the fourth quarter of 2018. The transaction will be accretive to earnings per share in the mid-single digits in the first full year of operation.

Moelis & Company LLC acted as financial advisor while John G. Klauberg, Frederick J. Lark, Bruce R. Jocz, Michele J. Alexander, Catherine P. McCarthy, Heather Palmer, Rebecca L. Baker, Michael E. Espinoza, Allison K. Perry, Vivian Y. Ouyang, John G. Melly Jr., Seth T. Lucia, Charles M. Lupica, Jessica M. Monastra, Charlotte Keenan, Eric S. Lai and Elena V. Rubinov of Bracewell LLP acted as legal advisors to Hydro One Limited. Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as financial advisor for Avista and will be paid fees of $28 million. George P. Stamas, Alexander D. Fine, Brendan J. Reed, Andrew Calder, James Gillespie and Scott Price of Kirkland & Ellis LLP acted as legal advisors to Avista Corporation. D.F. King & Co., Inc. acted as information agent to Avista Corporation and will be paid the fee of $15,000.

Hydro One Limited (TSX:H) cancelled the acquisition of Avista Corporation (NYSE:AVA) on January 23, 2019. The decision to mutually terminate the transaction follows the recent orders by the Washington Utilities and Transportation Commission and the Idaho Public Utilities Commission which denied approval of the merger. As required by the merger agreement, Hydro One will pay Avista a $103 million termination fee.