Published in Finance

Consumers Energy to sell bank subsidiary in $960 million deal

BY Tuesday, June 08, 2021 01:02pm

JACKSON — CMS Energy Corp. plans to sell a Utah-based bank that specializes in home improvement lending nationwide.

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The sale of Salt Lake City-based EnerBank USA to Regions Bank, a subsidiary of Regions Financial Corp. in Birmingham, Ala., for $960 million should close in the fourth quarter, pending regulatory approval.


Divesting what CMS President and CEO Garrick Rochow called a “non-core asset” will provide the Jackson-based CMS Energy (NYSE: CMS) — the parent corporation of Consumers Energy Co. — capital to invest in its core energy business, including clean energy. The sale means “that our simple investment thesis gets even simpler and more utility focused,” said Rochow, noting that 95 percent of corporate earnings come from the utility.

“We are focused on (being) a world-class energy company,” he said in a conference call with analysts to discuss the sale. “We are moving from a non-core business into our core and we’re doing that at an attractive valuation, and an investment in the utility to me makes great sense.”

The planned sale also “improves CMS Energy’s risk profile and keeps us on track to deliver 6 to 8 percent long-term adjusted (earnings per share) growth for our investors,” Rochow said.

In announcing the deal this morning, CMS Energy affirmed 2021 earnings guidance of $2.83 to $2.87 per share, presuming the deal closes in the fourth quarter. The corporation issued 2022 guidance for adjusted earnings of $2.85 to $2.87 per share.

The sale also eliminates the utility’s plan to issue equity from 2022 to 2024.

“The EnerBank transaction offers a potential catalyst to enable incremental customer investments at the utility,” said Rejji Hayes, executive vice president and chief financial officer at CMS. “We see a potential path to fund key initiatives around safety, reliability and clean energy generation without the diluted impact of new equity.”

Stephens Inc. served as financial adviser to Regions on the transaction, and Sullivan & Cromwell LLP served as legal counsel. Goldman Sachs & Co. LLC served as financial adviser to CMS Energy, and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel.

EnerBank USA at the end of the first quarter had $3.1 billion in total assets, deposits of $2.73 billion and $2.7 billion in total loans, according to a quarterly financial report to the FDIC. The bank recorded net income of $32.5 million.

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