Transaction, valued at $12.2 billion, creates leading Midwest
electric utility better positioned to serve customers and meet the
region’s energy needs.
KANSAS CITY, Mo.--(BUSINESS WIRE)--May 31, 2016--
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/
Source: Great Plains Energy Incorporated
Great Plains Energy Incorporated
Investors
Calvin
Girard, 816-654-1777
Senior Manager, Investor Relations
calvin.girard@kcpl.com
or
Media
Courtney
Hughley, 816-392-9455
Manager, Corporate Communications
courtney.hughley@kcpl.com
or
Westar
Energy, Inc.
Investors
Cody VandeVelde, 785-575-8227
Director,
Investor Relations
Cody.VandeVelde@westarenergy.com
or
Media
Jana
Dawson, 785-575-1975
Director, Corporate Communications
Jana.Dawson@WestarEnergy.com
or
Westar
Energy Media line: 888-613-0003
