Wisconsin Energy to Buy Integrys

• Offers $71.47 per Integrys share
• Offer is 17.3 pct premium to Integrys's Friday close
• Combined company to serve more than 4.3 mln customers
• Deal valued at $9.1 bln, including debt

Wisconsin Energy Corp said it would buy Integrys Energy Group Inc for $5.71 billion to create a larger, more diverse Midwest electric and natural gas delivery company.

The combined company, to be named WEC Energy Group Inc, will serve more than 4.3 million gas and electricity customers in Wisconsin, Illinois, Michigan and Minnesota.

The deal, which will help Wisconsin Energy sell more power at stable rates set by regulators, is the latest in a series of utility transactions aimed at minimizing exposure to the volatile open market for electric power.

Power prices on both the open and regulated markets have fallen, due to an abundance of cheap shale gas, increased energy efficiency and tepid economic growth.

Integrys also said on Monday that it was in the late stages of a competitive process to divest its non-regulated marketing unit, Integrys Energy Services.

Wisconsin Energy's deal for Integrys comes after PPL Corp said this month it would combine part of its U.S. power generation business with that of Riverstone Holdings LLC to form a public company.

In April, Exelon Corp said it would buy Pepco Holdings Inc for $6.83 billion.

Integrys shareholders will get 1.128 Wisconsin Energy shares and $18.58 in cash per share, which works out to $71.47 per share based on Wisconsin Energy's Friday close - a premium of 17.3 percent.

Integrys shares were trading at $67.41 before the bell. Wisconsin Energy's shares were down 2.5 percent at $45.70.

Including debt, the deal is valued at $9.1 billion.

Integrys had total debt of $3.38 billion as of March 31, according to Thomson Reuters data.

Wisconsin Energy Chief Executive Gale Klappa will lead the combined company after its expected close in the summer of 2015. Integrys CEO Charlie Schrock will remain in his current role until then, the companies said.

Wisconsin Energy said the deal would add to its earnings per share in the first full calendar year after closing.

The combined company will operate nearly 71,000 miles of electric distribution lines and more than 44,000 miles of gas transmission and distribution lines, making it the eighth largest natural gas distribution company in the United States.

It will also hold a 60 percent stake in American Transmission Co, a transmission-only utility.

The transaction is subject to approvals from the Federal Energy Regulatory Commission, the Federal Communications Commission and some state commissions.

Barclays (BCS) is Wisconsin Energy's financial adviser, while Lazard (LAZ) is advising Integrys.

Skadden, Arps, Slate, Meagher & Flom LLP is Wisconsin Energy's legal counsel. Cravath, Swaine & Moore LLP and Foley & Lardner LLP are advising Integrys.

(Reporting by Swetha Gopinath in Bangalore; Editing by Sriraj Kalluvila, Saumyadeb Chakrabarty and Ted Kerr)