Constellation Acquires StarTex Power for $143 Million

May 26, 2011
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StarTex Power formally announced this morning that it has signed a definitive merger agreement to be acquired by Constellation Energy.

The acquisition was first reported by Matters on Monday (5/23).

Constellation said that it purchased StarTex for $142.5 million in an all-cash transaction.

Though not confirmed by either company, sources familiar with the transaction said that the quoted price reflects the equity value of StarTex, and excludes working capital and other considerations. One source said that the transaction also includes $35 million of working capital to be refunded to the StarTex principals. This is line with another source which reported the deal as valued at about $170 million. Both sources spoke confidentially given the proprietary nature of the information.

The acquisition cost equates to north of $1,000 per customer, in line with NRG Energy's acquisition of Green Mountain Energy.

StarTex's fiscal year 2010 EBITDA has been reported by market experts as about $32 million, though the figure was not confirmed by the company.

StarTex serves 170,000 residential and commercial customers in ERCOT. Constellation is also in the process of acquiring MXenergy. While MXenergy does not publicly disclose its ERCOT customer numbers, market estimates have placed the number somewhere in the 25,000 to 30,000 range.

Although the two units will operate separately, the combined books will still make Constellation one of the largest mass market players in the ERCOT market.

Constellation is also in the process of merging with Exelon, and, on a combined basis, the two will own or control 4,731 MW of capacity in ERCOT (when including Exelon's separate acquisition of Wolf Hollow), which equals 5.58% of installed capacity.

"We are excited to announce our merger with Constellation and look forward to having opportunities for further growth by using Constellation's national footprint," said Bob Zlotnik, chief executive officer and president of StarTex Power. "Not only does this bring greater opportunities for our employees, but it gives StarTex Power stronger support to continue to serve our customers with the Star Treatment while furthering our commitment to upholding the highest standards in the industry," Bob Zlotnik added.

"This merger provides us with greater accessibility to expansion while giving Constellation a strong presence in the Texas market focused on mass market growth," Bob Zlotnik continued.

"Our employees, who helped make this company what it is today, own roughly 30 percent of StarTex Power. This merger continues to Return the Favor to them by fully vesting their interests so each employee will share financially in the proceeds from the sale," added Marcie Zlotnik, chairman of StarTex Power.

StarTex Power will remain headquartered in Houston where its roughly 150 employees reside.

Credit Suisse acted as exclusive financial adviser and Baker Botts LLP acted as legal counsel to StarTex Power on the transaction.

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