Ms. Janet Craig reports

FORTIS INC. TO ACQUIRE ITC HOLDINGS CORP. FOR US$11.3 BILLION

Fortis Inc. and ITC Holdings Corp. have entered into an agreement and plan of merger pursuant to which Fortis will acquire ITC in a transaction valued at approximately $11.3-billion (U.S.). Under the terms of the transaction ITC shareholders will receive $22.57 (U.S.) in cash and 0.7520 Fortis share per ITC share. At yesterday's closing price for Fortis common shares and the U.S.-dollar/Canadian-dollar exchange rate, the per-share consideration represents a premium of 33 per cent over ITC's unaffected closing share price on Nov. 27, 2015, and a 37-per-cent premium to the unaffected average closing price over the 30-day period prior to Nov. 27, 2015.

Highlights:

• The acquisition aligns with Fortis's financial objectives by providing approximately 5-per-cent-earnings-per-common-share accretion in the first full year following closing, excluding one-time acquisition-related expenses. Fortis continues to target 6-per-cent average annual dividend growth through 2020.
• ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load exceeding 26,000 megawatts along approximately 15,600 miles of transmission line.
• Fortis will become one of the top 15 North American public utilities ranked by enterprise value.
• ITC's Federal Energy Regulatory Commission-regulated operations, with substantial rate base growth and robust investment opportunities, add a new growth platform.
• Following the acquisition, ITC will continue as a stand-alone transmission company, retaining its focus on growth and operational excellence while benefiting from a broader platform that will support its mission to modernize electrical infrastructure in the United States.
• ITC's average rate base and construction work in progress are expected to grow at a compounded average annual rate of approximately 7.5 per cent through 2018.
• Fortis intends on retaining all of ITC's employees and maintaining the corporate headquarters in Novi, Mich.
• The per-share consideration of cash and Fortis stock payable to ITC shareholders of $44.90 (U.S.) represents a 33-per-cent premium to the unaffected closing share price on Nov. 27, 2015, and a 37-per-cent premium to the 30-day average unaffected share price prior to Nov. 27, 2015. Pro forma, upon closing of the transaction, ITC shareholders will own approximately 27 per cent of the combined company and will receive a meaningful increase in their dividend per share.
• In connection with the acquisition, Fortis will apply to list its common shares on the New York Stock Exchange.

Following the acquisition, Fortis will be one of the top 15 North American public utilities ranked by enterprise value, with an estimated enterprise value of $42-billion ($30-billion (U.S.)). On a pro forma basis, the consolidated midyear 2016 rate base of Fortis would increase by approximately $8-billion ($6-billion (U.S.)) to approximately $26-billion ($18-billion (U.S.)), as a result of the acquisition.

"Fortis has grown its business through strategic acquisitions that have contributed to strong organic growth over the past decade. Our performance in 2015 is a clear demonstration of the success of this strategy," said Barry Perry, president and chief executive officer of Fortis. "The acquisition of ITC -- a premier pure-play transmission utility -- is a continuation of this growth strategy. ITC not only further strengthens and diversifies our business, but it also accelerates our growth."

Under the terms of the acquisition, which has been approved by the boards of directors of both companies, ITC shareholders will receive approximately $6.9-billion (U.S.) in Fortis common shares and cash at closing, and Fortis will assume approximately $4.4-billion (U.S.) of consolidated ITC indebtedness. Upon completion of the acquisition, ITC will become a subsidiary of Fortis and approximately 27 per cent of the common shares of Fortis will be held by ITC shareholders. Fortis will apply to list its common shares on the New York Stock Exchange in connection with the acquisition and will continue to have its shares listed on the Toronto Stock Exchange.

"From the very beginning of ITC, we have been focused on creating meaningful value for all stakeholders, including customers, investors and employees, by becoming the leading electric transmission company in the U.S.," said Joseph L. Welch, chairman, president and chief executive officer of ITC. "Fortis is an outstanding company with a proven track record of successfully acquiring and managing U.S. based utilities in a decentralized manner. This transaction accomplishes our objectives by better positioning the company to have a higher level of focus on pursuing our long-term strategy of investing in transmission opportunities to improve reliability, expand access to power markets, and allow new generating resources to interconnect to transmission systems and lower the overall cost of delivered energy for customers.

"I am forever grateful for the hard work of the ITC employees in building this great company and look forward to a bright future of continued operational excellence supported by the Fortis platform. We also very much appreciate the long-standing support of our investors who will receive an attractive premium for their investment and will also benefit from the opportunity to participate in the upside of the combination, including future value creation and a growing dividend program."

In addition to the necessary state approvals, the closing of the acquisition is subject to ITC and Fortis shareholder approvals, the satisfaction of other customary closing conditions, and certain regulatory and federal approvals, including, among others, those of the Federal Energy Regulatory Commission (FERC), the Committee on Foreign Investment in the United States and the United States Federal Trade Commission/Department of Justice under the Hart-Scott-Rodino Antitrust Improvement Act. The closing of the acquisition is expected to occur in late 2016.

A joint conference call and webcast is scheduled for Tuesday, Feb. 9, 2016, beginning at 8:30 a.m. ET (details provided below).

Entry into FERC-regulated transmission

By acquiring ITC, Fortis is acquiring the largest independent pure-play electric transmission company in the United States. ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load exceeding 26,000 megawatts along approximately 15,600 miles of transmission line. In addition, ITC is a public utility and independent transmission owner in Wisconsin. ITC has grown its average rate base at a compounded average annual rate of approximately 16 per cent over the last three years and, as of Sept. 30, 2015, ITC had assets of $7.4-billion (U.S.).

"The acquisition of ITC is in alignment with our business model and acquisition strategy, providing meaningful accretion, and creating a unique, highly diversified, low-risk regulated energy transportation platform," explained Mr. Perry. "The predictable returns of a transmission business, with no commodity or fuel exposure, are very compelling.

"We take a very disciplined approach to acquisitions and are focused on businesses that have experienced management teams, provide geographic diversity in favourable economic regions and possess significant growth prospects."

Strategic rationale

The strategic rationale underlying the transaction includes:

Accretive transaction

The acquisition aligns with Fortis's financial objectives by providing approximately 5-per-cent-earnings-per-common-share accretion in the first full year following closing, excluding one-time acquisition-related expenses. Fortis continues to target 6-per-cent average annual dividend growth through 2020.

Increases diversification

The acquisition represents a singular opportunity for Fortis to significantly diversify its business in terms of regulatory jurisdictions, business risk profile and regional economic mix. Based on the 12 months ended Sept. 30, 2015, pro forma the acquisition, ITC is expected to represent almost 40 per cent of the consolidated regulated operating earnings of Fortis. The acquisition will increase the regional economic diversity of Fortis from its current operations in five Canadian provinces, the U.S. states of New York and Arizona, and three Caribbean countries, to include a presence in eight additional U.S. states.

Supportive FERC regulation

ITC's tariff rates are regulated by FERC, which has been one of the most consistently supportive utility regulators in North America providing reasonable returns and equity ratios. Rates are set using a forward-looking rate-setting mechanism with an annual true-up, which provides timely cost recovery and reduces regulatory lag.

Long-term rate base growth prospects

There is a significant need for capital investment in the aging U.S. electric transmission sector to improve reliability, expand access to power markets, allow new generating resources to interconnect to the transmission system and lower the overall cost of energy delivery. Based on ITC's planned capital expenditure program, ITC's average rate base and construction work in progress (CWIP) is expected to increase at a compounded average annual rate of approximately 7.5 per cent through 2018.

Clean energy policies in the United States, including renewable portfolio standards, are driving the need for new transmission investment to facilitate the delivery of electricity from renewable energy resources to load-serving entities. In particular, the clean power plan (CPP) is expected to drive investment in renewables and the retirement of coal-fired generation in the U.S. With its economies of scale and geographic footprint, ITC is favourably positioned to participate in the significant transmission investment opportunity fostered by the CPP.

Management expertise

The ITC management team has a proven record of strong EPS growth, total shareholder return, cash flow from operations and operational efficiencies. From its initial public offering in 2005 through November, 2015, ITC has delivered more than double the annual shareholder returns of the S&P 500 Utilities Sector Index. ITC's experienced and execution-focused management team will continue to operate independently under the ownership structure of Fortis.

Transaction details

The agreement and plan of merger relating to the acquisition include customary provisions.

In connection with the acquisition, Fortis will become a registrant with the United States Securities and Exchange Commission and will apply to list its common shares on the NYSE.

Each of the ITC board of directors and Fortis board of directors has approved the acquisition and has determined that the acquisition is in the best interest of its shareholders. Each of the ITC board and Fortis board recommend that its shareholders vote in favour of the proposed acquisition.

In accordance with the requirements of the Toronto Stock Exchange, Fortis will seek shareholder approval of the issuance of common shares representing 40 per cent of the outstanding common shares of Fortis (on a preacquisition, non-diluted basis) as partial consideration for the acquisition at an upcoming shareholders meeting. The resolution is required to be approved by a majority of Fortis shareholders represented in person or by proxy at the meeting. A proxy circular describing the acquisition in more detail will be mailed to Fortis shareholders in advance of the meeting.

Acquisition financing

The financing of the acquisition has been structured to allow Fortis to maintain a solid investment-grade credit rating and is consistent with Fortis's existing capital structure. Financing for the cash portion of the acquisition will be achieved primarily through the issuance of approximately $2-billion (U.S.) of Fortis debt and the sale of up to 19.9 per cent of ITC to one or more infrastructure-focused minority investors.

Advisers

Goldman Sachs and Scotiabank served as financial advisers to Fortis and provided committed financing. White & Case LLP and Davies Ward Phillips & Vineberg LLP acted as legal advisers to Fortis.

Barclays and Morgan Stanley acted as financial advisers to ITC. Simpson Thacher & Bartlett LLP acted as legal adviser to ITC. Lazard served as financial adviser and Jones Day acted as legal adviser to ITC's board of directors.

Teleconference to discuss acquisition

Fortis and ITC will host a conference call and webcast, accompanied by slides, to discuss the transaction on Feb. 9, 2016, at 8:30 a.m. ET.

To access via conference call, please dial 1-844-862-1432 (North America) or 1-617-826-1698 (international), and enter passcode 48792392.

Presentation slides for the conference call are available on the Fortis website and on the ITC website.

A replay of the conference call will be available two hours after the conclusion of the call until March 9, 2016. Interested parties can call 1-855-859-2056 or 1-404-537-3406 and enter passcode 48792392.

We seek Safe Harbor.