Great Plains Energy Incorporated GXP, the parent company of KCP&L, and Westar Energy Inc WR, revealed a definitive agreement to acquire Westar in a cash and stock transaction. According to the two companies, it has an enterprise value of about $12.2 billion. That included total equity value of about $8.6 billion. After the closure of the transaction, which is expected in Spring 2017, Westar will become a fully owned subsidiary of Great Plains Energy.
According to the terms of the deal, Westar shareholders will get $60.00 per share of total consideration for each share of its common stock, consisting of $51.00 in cash and $9.00 in Great Plains Energy common stock, subject to a 7.5 percent collar based upon the Great Plains Energy common stock price at the time of the closing of the transaction. The company indicated the exchange ratio 0.2709 to 0.3148 shares of Great Plains Energy common stock for each Westar share of common stock, which represented a consideration mix of 85 percent cash and 15 percent stock.
Great Plains Energy said the transaction enterprise value was estimated to be about $12.2 billion. That included about $8.6 billion in total stock and cash consideration and the assumption of about $3.6 billion in Westar's debt. The company stated it secured about $8.0 billion of committed debt financing from Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC in respect of the transaction for the full cash portion of the transaction consideration.
The acquiring firm said it would have over 1.5 million customers in Kansas and Missouri, close to 13,000 MW of generation capacity, nearly 10,000 miles of transmission lines, and more than 51,000 miles of distribution lines after the transaction is completed. Aside from that, over 45 percent of the integrated utility's retail customer demand could be met with emission-free energy.
Great Plains Energy and KCP&L chairman and CEO, Terry Bassham, commented, "Westar and KCP&L are trusted neighbors and have worked together for generations in Kansas. The combination of our two companies is the best fit for meeting our region's energy needs. This is an important transaction for Kansas and our entire region. By combining our two companies, we are keeping ownership local and management responsive to regulators, customers and regional needs, while enhancing our ability to build long-term value for shareholders."
The companies indicated Great Plains Energy and Westar jointly own and operate the Wolf Creek Nuclear Generating Station and the La Cygne and Jeffrey power plants currently. As a result of the acquisition, Great Plains Energy would have a more diverse and sustainable generation portfolio. The company believes this would offer an increased flexibility to mitigate the potential customer impacts from future carbon regulation. Additionally, among investor-owned utilities in the United States, the integrated entity would have one of the biggest portfolios of wind generation in the country.
Westar president and CEO, Mark Ruelle, also reacted to the developments stating, "This is an important day for Westar, our customers, employees, shareholders, the communities we support and for the state of Kansas. Our commitment to reliability, customer satisfaction, safety and sustainability is consistent with Great Plains Energy's values, which makes them our ideal partner. We're eager to join the Great Plains Energy team, and excited about this new chapter that combines the unique strengths of our respective organizations to form an even stronger company for our state."
The two firms expect making the required regulatory filings with the Kansas Corporation Commission, as well as other regulatory entities in June and July. Aside from that, both the companies would seek shareholder approvals later this year. The transaction is subject to approvals from the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.
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