ACQUISITION

On June 29, 2015, Wisconsin Energy acquired 100% of the outstanding common shares of Integrys, a provider of regulated natural gas and electricity, as well as nonregulated renewable energy and compressed natural gas products and services. Integrys also held a 34% interest in ATC, a for-profit transmission company regulated by the Federal Energy Regulatory Commission (FERC). The acquisition of Integrys provides increased access to scale, the potential for long-term cost savings through a combination of lower capital and operating costs, and the potential for operating efficiencies.

Pursuant to the Merger Agreement, Integrys’ shareholders received 1.128 shares of Wisconsin Energy common stock and $18.58 in cash per Integrys share of common stock. The total consideration transferred was based on the closing price of Wisconsin Energy common stock on June 29, 2015, and was calculated as follows:



	Stock		Cash		Total
	(Millions of Dollars, except per share amounts)
Integrys common shares outstanding at June 29, 2015	79,963,091		79,963,091
Exchange ratio	1.128
Wisconsin Energy shares issued for Integrys shares (a)	90,187,884
Closing price of Wisconsin Energy common shares on June 29, 2015	$45.16
Fair value of common stock issued	$	4,072.9			$	4,072.9
Cash paid per share of Integrys shares outstanding			$18.58
Fair value of cash paid for Integrys shares (a)			$	1,486.2	$	1,486.2
Consideration attributable to settlement of equity awards, net of tax			$	24.0	$	24.0
Total purchase price	$	4,072.9	$	1,510.2	$	5,583.1

(a) 10,483 fractional shares totaling $0.5 million were paid in cash.

All Integrys unvested stock-based compensation awards became fully vested upon the close of the transaction and were either paid to award recipients in cash, or the value of the awards was deferred into a deferred compensation plan. In addition, all vested but unexercised Integrys stock options were paid in cash. In accordance with accounting guidance for business combinations, the expense caused by the acceleration of the vesting was an expense related to the transaction.

The Integrys assets acquired and the liabilities assumed were measured at estimated fair value as defined in the accounting guidance.

Substantially all of Integrys' operations are subject to the rate-setting authority of federal and state regulatory commissions. These operations are accounted for in accordance with GAAP accounting guidance for regulated operations. In addition, the underlying assets and liabilities of ATC are regulated by FERC. The fair values of Integrys' assets and liabilities subject to these rate-setting provisions approximate their carrying values, and the assets and liabilities acquired and pro forma financial information do not reflect any net adjustments related to these amounts.

The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was recognized as goodwill. The goodwill reflects the value paid for the increased access to scale and efficiencies as a result of the combination. The goodwill recognized is not deductible for income tax purposes, and as such no deferred taxes have been recorded related to goodwill. The preliminary purchase price allocation of the acquisition was as follows:



	(Millions of Dollars)
Current assets	$	1,178.2
Net property, plant and equipment	7,098.2
Goodwill	2,944.6
Deferred charges and other assets, excluding goodwill	2,410.5
Current liabilities, including current maturities of long-term debt	(1,260.1		)
Deferred credits and other liabilities	(3,769.6		)
Long-term debt	(2,967.6		)
Preferred stock of subsidiary	(51.1		)
Total purchase price	$	5,583.1

The allocation of goodwill to the reporting segments has not yet been determined, due to the short time frame between the acquisition close date and the issuing date of this report.

The acquisition was subject to the approvals of various government agencies, including the FERC, Federal Communications Commission (FCC), Public Service Commission of Wisconsin (PSCW), Illinois Commerce Commission (ICC), Michigan Public Service Commission (MPSC), and Minnesota Public Utilities Commission (MPUC). Approvals were obtained from all agencies subject to several conditions. The PSCW order included the following conditions:


•	Wisconsin Electric and Wisconsin Gas will be subject to an earnings sharing mechanism for three years beginning January 1, 2016. Under the earnings sharing mechanism, any additional earnings over the authorized rate of return will be shared with ratepayers.


•	Any future electric generation projects affecting Wisconsin ratepayers submitted by WEC Energy Group or its subsidiaries will first consider the extent to which existing intercompany resources can meet energy and capacity needs.

Additionally, the ICC order included a base rate freeze for The Peoples Gas Light and Coke Company (PGL) and North Shore Gas Company (NSG) effective for two years after the close of the acquisition.

We do not believe that the conditions set forth in the various regulatory orders approving the acquisition will have a material impact on operations or financial results.

The following unaudited pro forma financial information reflects the consolidated results and amortization of purchase price adjustments as if the acquisition had taken place on January 1, 2014. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or the future consolidated results of WEC Energy Group.

The pro forma financial information does not reflect any potential cost savings from operating efficiencies resulting from the transaction and does not include transaction costs related to the acquisition. The information is preliminary in nature and subject to change. After-tax transaction costs incurred were $53.9 million ($0.24 per share) and $62.3 million ($0.28 per share) for the three and six months ended June 30, 2015, respectively, and $3.0 million ($0.01 per share) for both the three and six months ended June 30, 2014, which were recorded primarily in Other Operation and Maintenance expense.



Unaudited Pro Forma Financial Information	Three Months Ended June 30				Six Months Ended June 30
	2015		2014		2015		2014
	(Millions of Dollars, Except Per Share Amounts)
Operating Revenues	$	1,629.2	$	1,879.5	$	4,180.1	$	5,208.2
Net Income	$	159.1	$	143.2	$	488.7	$	499.5
Earnings per share (Basic)	$	0.50	$	0.46	$	1.55	$	1.54
Earnings per share (Diluted)	$	0.50	$	0.45	$	1.54	$	1.53

As a result of the acquisition, our ownership of ATC increased to approximately 60%. We have made commitments with respect to our voting rights of the combined ownership of ATC, which are included as enforceable conditions in the orders approving the transaction by the FERC and the PSCW. We also expect that ATC's governance documents will include these voting commitments. Under GAAP, these commitments do not allow for the consolidation of ATC in our financial statements and the 60% ownership is accounted for as an equity method investment subsequent to the close of the transaction. See Note 11 -- Investment in ATC in the Notes to Consolidated Condensed Financial Statements.