Nancy Southern sees Emera deal as a win-win for ATCO

Walking around her home at night the past few months, her dogs trotting behind her, ATCO Ltd. ACO-X-T chief executive Nancy Southern did a lot of soul searching.

She wondered what her late father, Ron Southern, would have thought of the deal she was considering: a merger of Halifax-based Emera Inc. EMA-T and the utilities part of ATCO, the business he and his own father founded 80 years ago.

On Tuesday, Emera announced a friendly, $14.3-billion, all-stock offer for Canadian Utilities Ltd. CU-T, one of the businesses under the wide umbrella of Calgary-based ATCO. The move stands to create one of the 20 largest utility companies in North America in what would be one of the biggest mergers in Canadian history.

Ms. Southern has presided over ATCO since 2003, succeeding her father, who died in 2016.

His answer to her late-night question?

“My dad had great aspirations for what comes next, and I have great aspirations for what comes next for ATCO,” she said in an interview Tuesday.

“He said to me in our chats, ‘Well done.’ That was his usual way of acknowledging anything good − ‘Well done.’”

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The deal is unquestionably transformational for the Alberta institutions of ATCO and Canadian Utilities, and Ms. Southern said it also sends a small but important message about “how Canada can be unified, east to west.”

More than that, however, she said the deal will give ATCO’s varied businesses the room to grow and greater access to capital markets.

ATCO is a sprawling conglomerate, stitched together over nearly eight decades. Ron Southern was just 17 when it was founded.

The company started out as Alberta Trailer Hire, providing housing during the province’s first oil boom, which often saw workers bunking down in farmers’ silos or tar paper shacks. In 1960, it secured its first large overseas housing contract, on the Mangla Dam hydroelectric project in Pakistan. Then it locked down the Guri Dam project in Venezuela. In 1961, it expanded into Australia, opening a modular-structures facility in Adelaide.

ATCO didn’t break into utilities until 1980, when it bought 58.1 per cent of Canadian Utilities. In 2015, it completed the longest transmission line in Alberta’s history, roughly 500 kilometres, then launched its own electricity and natural gas retail company.

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Today ATCO has subsidiaries operating in more than 100 countries, encompassing engineering, logistics, energy systems, construction and utilities – though it still may be best known for the grey, white and yellow trailers that serve as temporary offices and worker housing.

All told, ATCO’s various divisions, subsidiaries and units bring in roughly $5-billion in annual revenue.

The plan under the Emera deal is for ATCO’s housing, defence and industrial businesses to be spun off into a new public company. Ms. Southern will stay on as chair and CEO of that company, which will keep the ATCO name and remain based in Calgary. For each existing ATCO share, investors will receive 0.865 of an Emera common share and one share of the new company.

The deal is a win-win for ATCO, Ms. Southern said. Investors get the optionality of two different shares, and Canadian Utilities merged with Emera will be the kind of pure-play business that analysts traditionally prefer.

“Smooth courses are promised to no one. But I do believe that this is a great opportunity for all of our people in our companies,” she said.

The change means ATCO’s non-utilities businesses can be assessed on their own, Ms. Southern said. That, in turn, will provide a clear view of how they are performing and help identify attractive investment opportunities, such as ATCO’s data security startup or opening up manufacturing units in Europe, she said.

ATCO is already involved in various major projects, including the Grays Bay Road and Port, a proposed all-season, 230-kilometre road from the Nunavut border to a deepwater port and airfield at Grays Bay on the Arctic Ocean.

On an investor call Tuesday morning, Ms. Southern said ATCO’s future is about providing housing and defence industry services wherever they are needed in Canada and around the world.

“We have no fear of going to wild, remote, cold places,” she said, pointing out that ATCO took pride in sending more than 600 employees to work at the Canadian Armed Forces base in Kandahar, Afghanistan, and is now working with NORAD on planned radar bases in the Canadian Arctic.

“We are proven partners to the armed forces, not new arrivals” looking for defence contracts, Ms. Southern said.

“The sky’s the limit for us, and we’ll compete and we’ll win.”

With a report from Andrew Willis