Transaction, valued at $12.2 billion, creates
leading Midwest electric utility better positioned to serve
customers and meet the region’s energy needs.
Great Plains Energy Incorporated (NYSE: GXP), the parent company
of KCP&L, and Westar Energy, Inc. (NYSE: WR), today announced a
definitive agreement for Great Plains Energy to acquire Westar in a
combined cash and stock transaction with an enterprise value of
approximately $12.2 billion, including total equity value of
approximately $8.6 billion. Upon closing, Westar will become a
wholly owned subsidiary of Great Plains Energy.
Once the transaction is complete, Great Plains Energy will have
more than 1.5 million customers in Kansas and Missouri, nearly
13,000 megawatts of generation capacity, almost 10,000 miles of
transmission lines and over 51,000 miles of distribution lines. In
addition, more than 45 percent of the combined utility’s retail
customer demand can be met with emission-free energy.
“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,”
said Terry Bassham, chairman and chief executive officer
of Great Plains Energy and KCP&L. “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.”
Currently, Great Plains Energy and Westar jointly own and
operate the Wolf Creek Nuclear Generating Station, as well as the
La Cygne and Jeffrey power plants. With the addition of Westar’s
generation fleet, Great Plains Energy will have a more diverse and
sustainable generation portfolio. This will provide increased
flexibility to mitigate the potential customer impacts from future
carbon regulation. In addition, among investor-owned utilities in
the United States, the combined company will have one of the
largest portfolios of wind generation in the country.
“This is an important day for Westar, our customers, employees,
shareholders, the communities we support and for the state of
Kansas,” said Mark Ruelle, president and chief executive officer of
Westar. “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.”
Great Plains Energy has an established track record of
successful integration with adjacent electric utilities. In 2008,
Great Plains Energy completed its acquisition of Aquila, an
electric utility serving customers in adjacent areas of Missouri.
That successful acquisition has delivered – and continues to
deliver – significant savings for customers, which exceeded initial
expectations and was reviewed and approved by both the Missouri
Public Service Commission and the Kansas Corporation
Commission.
“The utility industry is facing rising customer expectations,
increasing environmental standards and emerging cyber security
threats. These factors, coupled with slower demand growth for
electricity, are driving our costs and customer rates higher. Our
acquisition of Westar will create operational efficiencies and
future cost savings that will benefit all involved – customers,
shareholders, employees and the communities we serve. These savings
also will help reduce future rate increase requests,” said Bassham.
“Combining our two companies will result in cost savings and
operational benefits for our more than 900,000 Kansas and 600,000
Missouri customers.”
Transaction terms and financing profile
Under the terms of the agreement, which was unanimously approved
by the boards of directors for both companies, Westar shareholders
will receive $60.00 per share of total consideration for each share
of Westar 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, with the exchange ratio for the
stock consideration ranging between 0.2709 to 0.3148 shares of
Great Plains Energy common stock for each Westar share of common
stock, representing a consideration mix of 85 percent cash and 15
percent stock.
The transaction enterprise value is expected to be approximately
$12.2 billion, inclusive of approximately $8.6 billion in total
stock and cash consideration to be received by Westar’s
shareholders and the assumption of approximately $3.6 billion in
Westar’s debt. Great Plains Energy has secured approximately $8.0
billion of committed debt financing from Goldman Sachs Bank USA and
Goldman Sachs Lending Partners LLC in connection with the
transaction for the full cash portion of the transaction
consideration. Great Plains Energy has also secured a $750 million
mandatorily preferred convertible equity commitment from the
Ontario Municipal Employees Retirement System (OMERS), to be funded
at the closing of the transaction. Great Plains Energy plans to
issue long-term financing consisting of a combination of equity,
equity-linked securities and debt prior to closing of the
transaction. This financing mix will allow Great Plains Energy to
maintain its solid, investment grade credit ratings.
Great Plains Energy expects savings generated from combining the
two companies to be consistent with recent comparable transactions,
and its own recent experience. Great Plains Energy expects the
acquisition will be neutral to earnings-per-share in the first full
calendar year of operations and significantly accretive thereafter.
The long-term earnings growth target of the combined company is
expected to grow to six to eight percent—better than either company
on a standalone basis.
Leadership and headquarters
Upon completion of the transaction, Bassham will be chairman and
chief executive officer of the combined company. Ruelle will
remain in his current role with Westar until the closing of the
transaction. In addition, Great Plains Energy will add one director
from the Westar Board of Directors to the Great Plains Energy Board
of Directors.
“We understand the importance of Westar to the communities it
serves and the meaningful contributions it makes as a major
employer in Kansas,” said Bassham. “We are committed to maintaining
the operating headquarters for our Kansas service territory in
downtown Topeka. We also know that Westar has a reputation as a
strong supporter of community and charitable initiatives. We will
continue this legacy and are committed to maintaining a strong
presence in all of the communities Westar serves.”
Sustainability
Customers today expect their utility providers to identify and
advance energy efficiency options that give them greater control
and choice. The combined company will have a greater, more diverse
portfolio of energy solutions that give customers the opportunities
to better manage their individual energy needs. In addition, Great
Plains Energy operates the nation’s largest utility-owned electric
vehicle charging network, which can be expanded to benefit Westar’s
customers.
Regulatory Approval
The companies anticipate making the required regulatory filings
with the Kansas Corporation Commission and other regulatory
entities during June and July of 2016. In addition, Great Plains
Energy and Westar will seek shareholder approvals later this year.
The transaction is subject to approvals from the Federal Energy
Regulatory Commission and the Nuclear Regulatory Commission. The
transaction also is subject to the notification, clearance and
reporting requirements under the Hart-Scott-Rodino Act by the
Federal Trade Commission and the U.S. Department of Justice. The
companies anticipate closing in the spring of 2017. In the coming
months, the companies will work together to develop a robust
integration plan.
Advisors
Goldman, Sachs & Co. served as the exclusive financial
advisor and Bracewell LLP served as legal advisor to Great Plains
Energy. Guggenheim Securities, LLC served as the sole financial
advisor and Baker Botts LLP served as legal advisor to Westar
Energy.
Analyst Conference Call/Webcast
Great Plains Energy and Westar will host a financial community
conference call to provide additional information on Tuesday, May
31, 2016, at 10:00 a.m. Eastern Daylight Time/9:00 a.m. Central
Daylight Time to discuss the Great Plains Energy and Westar
transaction.
A live audio webcast of the conference call and presentation
slides will be available on the investor relations page of Great
Plains Energy’s website at www.greatplainsenergy.com. The webcast
will be accessible only in a “listen-only” mode.
The conference call may be accessible by dialing (888) 353-7071
(U.S./Canada) or (724) 498-4416 (international) five to ten minutes
prior to the scheduled start time. The passcode is 23802311.
A replay and transcript of the call will be available on or
before Wednesday, June 1, 2016, by accessing the investor relations
section of the company’s website. A telephonic replay of the
conference call will also be available on or before Wednesday, June
1, 2016, through June 7, 2016, by dialing (855) 859-2056
(U.S./Canada) or (404) 537-3406 (international). The passcode is
23802311.
About Great Plains Energy
Headquartered in Kansas City, Mo., Great Plains Energy
Incorporated (NYSE: GXP) is the holding company of Kansas
City Power & Light Company and KCP&L Greater
Missouri Operations Company, two of the leading regulated providers
of electricity in the Midwest. Kansas City Power & Light
Company and KCP&L Greater Missouri Operations
Company use KCP&L as a brand name. More
information about the companies is available on the internet at
www.greatplainsenergy.com or www.kcpl.com.
About Westar Energy
Westar Energy, Inc. (NYSE: WR) is Kansas’ largest electric
utility. For more than a century, Westar has provided Kansans the
safe, reliable electricity needed to power their homes, businesses
and communities. Every day, Westar professionals generate and
deliver electricity, protect the environment and provide excellent
service to nearly 700,000 customers. Westar’s 2,400 employees live,
volunteer and work in the communities they serve. The company has
7,200 MW of electric generation capacity fueled by wind, coal,
uranium, natural gas and landfill gas. Westar also is a leader in
electric transmission in Kansas. For more information about Westar
Energy, visit us at www.WestarEnergy.com.
Forward-Looking Statements
Statements made in this release that are not based on historical
facts are forward-looking, may involve risks and uncertainties, and
are intended to be as of the date when made. Forward-looking
statements include, but are not limited to, statements relating to
Great Plains Energy’s proposed acquisition of Westar, shareholder
and regulatory approvals, the completion of the proposed
transactions, benefits of the proposed transactions, and
anticipated future financial measures and operating performance and
results, including estimates for growth and other matters affecting
future operations. In connection with the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995, Great
Plains Energy and KCP&L are providing a number
of important factors that could cause actual results to differ
materially from the provided forward-looking information. These
important factors include: the risk that Great Plains Energy or
Westar may be unable to obtain shareholder approvals for the
proposed transactions or that Great Plains Energy or Westar may be
unable to obtain governmental and regulatory approvals required for
the proposed transactions, or that required governmental and
regulatory approvals or agreements with other parties interested
therein may delay the proposed transactions or may be subject to or
impose adverse conditions or costs; the occurrence of any event,
change or other circumstances that could give rise to the
termination of the proposed transactions or could otherwise cause
the failure of the proposed transactions to close; risks relating
to the potential decline in the Great Plains Energy share price
resulting in an increase in the exchange ratio of Great Plains
Energy shares offered to Westar shareholders in accordance with the
transaction agreement and resulting in reduced value of the
proposed transactions to Great Plains Energy shareholders; the risk
that a condition to the closing of the proposed transactions or the
committed debt or equity financing may not be satisfied; the
failure to obtain, or to obtain on favorable terms, any equity,
debt or equity-linked financing necessary to complete or
permanently finance the proposed transactions and the costs of such
financing; the outcome of any legal proceedings, regulatory
proceedings or enforcement matters that may be instituted relating
to the proposed transactions; the receipt of an unsolicited offer
from another party to acquire assets or capital stock of Great
Plains Energy or Westar that could interfere with the proposed
transactions; the timing to consummate the proposed transactions;
the costs incurred to consummate the proposed transactions; the
possibility that the expected value creation from the proposed
transactions will not be realized, or will not be realized within
the expected time period; the credit ratings of the companies
following the proposed transactions; disruption from the proposed
transactions making it more difficult to maintain relationships
with customers, employees, regulators or suppliers; the diversion
of management time and attention on the proposed transactions;
future economic conditions in regional, national and international
markets and their effects on sales, prices and costs; prices and
availability of electricity in regional and national wholesale
markets; market perception of the energy industry, Great
Plains Energy and KCP&L changes in business
strategy, operations or development plans; the outcome of contract
negotiations for goods and services; effects of current or proposed
state and federal legislative and regulatory actions or
developments, including, but not limited to, deregulation,
re-regulation and restructuring of the electric utility industry;
decisions of regulators regarding rates the Companies can charge
for electricity; adverse changes in applicable laws, regulations,
rules, principles or practices governing tax, accounting and
environmental matters including, but not limited to, air and water
quality; financial market conditions and performance including, but
not limited to, changes in interest rates and credit spreads and in
availability and cost of capital, derivatives and hedges and the
effects on nuclear decommissioning trust and pension plan assets
and costs; impairments of long-lived assets or goodwill; credit
ratings; inflation rates; effectiveness of risk management policies
and procedures and the ability of counterparties to satisfy their
contractual commitments; impact of terrorist acts, including but
not limited to cyber terrorism; ability to carry out marketing and
sales plans; weather conditions including, but not limited to,
weather-related damage and their effects on sales, prices and
costs; cost, availability, quality and deliverability of fuel; the
inherent uncertainties in estimating the effects of weather,
economic conditions and other factors on customer consumption and
financial results; ability to achieve generation goals and the
occurrence and duration of planned and unplanned generation
outages; delays in the anticipated in-service dates and cost
increases of generation, transmission, distribution or other
projects; Great Plains Energy’s ability to successfully manage
transmission joint ventures or to integrate the transmission joint
ventures of Westar; the inherent risks associated with the
ownership and operation of a nuclear facility including, but not
limited to, environmental, health, safety, regulatory and financial
risks; workforce risks, including, but not limited to, increased
costs of retirement, health care and other benefits; and other
risks and uncertainties.
This list of factors is not all-inclusive because it is not
possible to predict all factors. Additional risks and uncertainties
will be discussed in the joint proxy statement/prospectus and other
materials that Great Plains Energy will file with the SEC in
connection with the proposed transactions. Other risk factors are
detailed from time to time in Great Plains Energy’s and KCP&L’s
quarterly reports on Form 10-Q and annual report on Form 10-K filed
with the Securities and Exchange Commission. Each
forward-looking statement speaks only as of the date of the
particular statement. Great Plains
Energy and KCP&L undertake no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise.
Information Concerning Forward-Looking Statements
Certain matters discussed in this news release are
“forward-looking statements.” The Private Securities Litigation
Reform Act of 1995 has established that these statements qualify
for safe harbors from liability. Forward-looking statements may
include words like “believe,” “anticipate,” “target,” “expect,”
“pro forma,” “estimate,” “intend,” “guidance” or words of similar
meaning. Forward-looking statements describe future plans,
objectives, expectations or goals. Although Westar believes that
its expectations are based on reasonable assumptions, all
forward-looking statements involve risk and uncertainty. The
factors that could cause actual results to differ materially from
these forward-looking statements include those discussed herein as
well as (1) those discussed in the company's Annual Report on Form
10-K for the year ended Dec. 31, 2015 (a) under the heading,
“Forward-Looking Statements,” (b) in ITEM 1. Business, (c) in ITEM
1A. Risk Factors, (d) in ITEM 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, and (e)
in ITEM 8. Financial Statements and Supplementary Data: Notes 13
and 15; (2) those discussed in the company's Quarterly Report on
Form 10-Q filed May 3, 2016, (a) in ITEM 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations and
(b) in Part I, Financial Information, ITEM 1. Financial Statements:
Notes 10 and 11; and (3) other factors discussed in the company's
filings with the Securities and Exchange Commission. Any
forward-looking statement speaks only as of the date such statement
was made, and the company does not undertake any obligation to
update any forward-looking statement to reflect events or
circumstances after the date on which such statement was made.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any proxy, vote or approval, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction. In connection with
the proposed transactions, Great Plains Energy will file a
Registration Statement on Form S-4, that includes a joint proxy
statement of Great Plains Energy and Westar, which also constitutes
a prospectus of Great Plains Energy, as well as other materials. WE
URGE INVESTORS TO READ THE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT/PROSPECTUS AND THESE OTHER MATERIALS CAREFULLY WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT GREAT PLAINS ENERGY, WESTAR AND THE PROPOSED TRANSACTION.
Investors will be able to obtain free copies of the registration
statement and joint proxy statement/prospectus (when available) and
other documents that will be filed by Great Plains Energy and
Westar with the SEC at http://www.sec.gov, the SEC’s website, or
from Great Plains Energy’s website
(http://www.greatplainsenergy.com) under the tab, “Investor
Relations” and then under the heading “SEC Filings.” These
documents will also be available free of charge from Westar’s
website (http://www.westarenergy.com) under the tab “Investors” and
then under the heading “SEC Filings.”
Participants in Proxy Solicitation
Great Plains Energy, Westar and their
respective directors and certain of their executive officers may be
deemed, under SEC rules, to be participants in the solicitation of
proxies from Great Plains Energy’s and Westar’s shareholders with
respect to the proposed transaction. Information regarding the
officers and directors of Great Plains Energy is included in its
definitive proxy statement for its 2016 annual meeting filed with
SEC on March 24, 2016. Information regarding the officers and
directors of Westar is included in its definitive proxy statement
for its 2016 annual meeting filed with the SEC on April 1, 2016.
More detailed information regarding the identity of potential
participants, and their direct or indirect interests, by
securities, holdings or otherwise, will be set forth in the
registration statement and joint proxy statement/prospectus and
other materials when they are filed with the SEC in connection with
the proposed transaction.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160531005616/en/
Great Plains Energy IncorporatedInvestorsCalvin
Girard, 816-654-1777Senior Manager, Investor
Relationscalvin.girard@kcpl.comorMediaCourtney Hughley,
816-392-9455Manager, Corporate
Communicationscourtney.hughley@kcpl.comorWestar Energy,
Inc.InvestorsCody VandeVelde, 785-575-8227Director,
Investor
RelationsCody.VandeVelde@westarenergy.comorMediaJana Dawson,
785-575-1975Director, Corporate
CommunicationsJana.Dawson@WestarEnergy.comorWestar Energy Media
line: 888-613-0003
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