KANSAS CITY, Mo.-
Aquila Inc. executives on Wednesday continued to defend the company’s proposed sale, saying they received only one final bid for the company’s assets and the price was higher than what their own consultants proposed.
“It gives us a solid sense that the market has spoken,” Richard Green, the Kansas City-based company’s chief executive officer, told analysts in a conference call.
Aquila announced Feb. 7 that it would sell its assets to Kansas City-based Great Plains Energy Inc. and Rapid City, S.D.-based Black Hills Corp. in separate transactions.
Under the deal, Black Hills will pay about $940 million in cash for Aquila’s electric utility in Colorado and its gas utilities in Colorado, Kansas, Nebraska and Iowa.
Great Plains will then acquire all the outstanding shares of Aquila for about $1.7 billion in cash and stock. Great Plains will also assume about $1 billion in Aquila’s debt.
Aquila shares, which closed at $4.67 per share the day before the deal was announced, have fallen 12 percent since then. Shares were up 1 cent to $4.10 in afternoon trading Wednesday on the New York Stock Exchange.
Green and Beth Armstrong, Aquila’s chief accounting officer, said Great Plains and Black Hills provided the only final bid in an auction process that began in June, when the company contacted nine potential bidders. Five provided initial bids—one offering up to $5 per share—but four eventually dropped out after taking a closer look at the numbers, Green said.
Aquila’s financial advisers in the deal, The Blackstone Group, Lehman Brothers Inc. and Evercore Partners, said the company was worth between $2.25 and $4.01 per share.
“On the basis of this analysis, the board and management assess that a price of $4.50 was fair from a financial point of view,” Armstrong said, referring to what the price would have been at the time.
Some shareholders have not been convinced, wary the company was selling cheap and angry that Green and other top executives at the struggling utility stand to receive millions in severance packages.
Peter Desloge, an analyst for hedge fund Pirate Capital LLC, one of the loudest critics, questioned whether Aquila would get a better price selling its remaining assets piecemeal.
“It seems as though the intention here was to do a simple, one-step deal, and I’m not convinced that you guys made a prudent and reasonable decision to investigate all possible options for the different parts,” Desloge said.
Green responded that while Aquila has sold a number of utilities and other assets over the past few years to reduce crushing debt built up as it invested in unregulated businesses, the company had determined selling some of the remaining parts wouldn’t leave enough revenue to operate the leftovers.
“It was not practical to continue to liquidate the company piece by piece,” he said.
Green said the company expects to hold a shareholder vote on the sale early in the third quarter. He added that if Aquila accepted a different offer before the vote, it would have to pay a $45 million “break up” fee.
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