USD 2.4 BN DEAL - Algonquin Power & Utilities Corp. to Acquire The Empire District Electric Company in C$3.4 Billion (US$2.4 Billion) Transaction
Algonquin Power & Utilities Corp. to Acquire The Empire District Electric Company in C$3.4 Billion (US$2.4 Billion) Transaction
NEWS RELEASE TRANSMITTED BY Marketwired
FOR: Algonquin Power & Utilities Corp.
TSX SYMBOL: AQN
FEBRUARY 9, 2016
Algonquin Power & Utilities Corp. to Acquire The Empire District Electric Company in C$3.4 Billion (US$2.4 Billion) Transaction
Acquisition is expected to be significantly accretive to EPS and FFOPS
OAKVILLE, ONTARIO and JOPLIN, MISSOURI--(Marketwired - Feb. 9, 2016) -
Highlights:
-- Major regulated utility acquisition results in a pro-forma Algonquin
Power & Utilities Corp. asset base of C$8.9 billion
-- Empire shareholders to receive US$34.00 per common share in cash,
representing a 21% premium to the closing share price on February 8,
2016
-- Aggregate purchase price of C$3.4 billion (US$2.4 billion), including
assumed debt, represents a 1.49x(1) multiple of Empire's projected rate
base and a 9.2x(2) multiple of Empire's 2017 EBITDA
-- Expected to be immediately accretive to APUC's earnings per share (EPS)
and funds from operations per share (FFOPS), positioning APUC for
further growth
-- Average annual accretion to EPS and FFOPS expected to be approximately
7% to 9% and 12% to 14%, respectively, for the three year period
following closing
-- Acquisition is aligned with APUC's financial objectives and provides
continuing support to APUC's 10% annual dividend growth rate target
-- APUC's financing plan designed to maintain strong investment grade
credit rating
-- Shifts APUC's overall business mix towards regulated operations, with
EBITDA from regulated operations increasing from 51% to 72%(2)
-- Empire has complementary operations in the States of Missouri and
Arkansas, with regional headquarters located in Joplin, Missouri
-- Empire has an experienced management team committed to providing
customers with safe, reliable, cost effective utility services
-- Empire will maintain its headquarters in Joplin after the acquisition
-- APUC expects to retain all existing Empire employees and the Empire
management team will lead Liberty Utilities' Central US Region
-- Empire's customer rates unaffected by the acquisition
Algonquin Power & Utilities Corp. ("APUC") (TSX:AQN) and The
Empire District Electric Company ("Empire") (NYSE:EDE) today
announced that a subsidiary of Liberty Utilities Co. ("Liberty Utilities"), APUC's wholly owned regulated utility business, has
entered into an agreement and plan of merger pursuant to which Liberty Utilities will indirectly acquire Empire and its subsidiaries (the "Transaction").
Under the terms of the all-cash transaction, which has been unanimously approved by the Board of Directors of each company, Empire's shareholders will receive US$34.00 per common share (the "Purchase Price"), representing an aggregate purchase price of approximately C$3.4 billion (US$2.4 billion), including the assumption of approximately C$1.3 billion (US$0.9 billion) of debt as of September 30, 2015. The Purchase Price represents a 21% premium to the closing price on February 8, 2016 and a 50% premium to Empire's unaffected share price on December 10, 2015.
Closing of the Transaction is subject to customary closing conditions, including the approval of Empire's common shareholders, and the receipt of certain state and federal regulatory and government approvals, including approval of the relevant commissions of the states of Arkansas, Kansas, Missouri and Oklahoma (collectively, the State Commissions), the Federal Communications Commission (the FCC), the Committee on Foreign Investment in the United States and the Federal Energy Regulatory Commission (the FERC), and the expiration or termination of the waiting period under the Hart-Scott-Rodino Act. The Transaction is expected to close in Q1 2017.
At the closing of the Transaction, Empire will become a wholly-owned subsidiary of Liberty Utilities and will cease to be a publicly-held corporation. Until such time as the acquisition closes, Empire expects to pay its regular quarterly dividends at the annualized rate (currently US $1.04 per share).
The Empire District Electric Company is a Joplin, Missouri based regulated electric, gas (through its wholly-owned subsidiary The Empire District Gas Company), and water utility, collectively serving approximately 218,000 customers in Missouri, Kansas, Oklahoma, and Arkansas.
"The acquisition of Empire represents a continuation of our disciplined growth strategy which strengthens and diversifies Algonquin's existing businesses and strategically expands our regulated utility footprint in the mid-west United States. The addition of this large, well run utility to the Algonquin family will support our 10% annual dividend growth target through significant accretion to shareholder cash flows and earnings," commented Ian Robertson, Chief Executive Officer of APUC. Empire's service territories, business lines and corporate culture are highly complementary to Liberty Utilities and we will continue Empire's history of prudently investing in its systems, communities and employees," Robertson added.
As noted by Brad Beecher, Empire's President and Chief Executive Officer, "Over the years, Empire has focused its energies on its core values of providing safe, reliable and economical service to its customers, a fair return to its shareholders, and a safe and positive work experience for its employees. We are not only pleased that our shareholders will be fairly compensated for their investment in Empire, but also that we've found a partner who shares our same values, is dedicated to continuing to serve our customers and communities at a high level, and is committed to maintaining the strong working relationships we have developed with our regulatory agencies."
Transaction Highlights
Significant Growth in Regulated Utility Operations
Upon closing, the Transaction will add C$4.1 billion of utility assets and 218,000 customers to Liberty Utilities' current portfolio of utility operations resulting in a total asset base of APUC of C$8.9 billion, an 87% increase. As a result of the Transaction, APUC's business mix will shift towards regulated utility operations, with EBITDA from regulated utility operations increasing from 51% to 72% on a pro forma basis.(2)
Consistent with APUC's Financial Goals
The Transaction is expected to be immediately accretive at close to APUC's EPS and FFOPS and generate average annual accretion to EPS and FFOPS of approximately 7% to 9% and 12% to 14%, respectively, for the three year period following closing. The Transaction will provide additional support to APUC's annual dividend growth target of 10%.
The financing plan to complete the Transaction is designed to maintain APUC's current credit profile and strong investment grade credit ratings.
APUC and Empire Have Complementary Operations
Empire is a regulated investment grade utility with approximately 90% of its on system revenue from Missouri and Arkansas, regulatory jurisdictions that Liberty Utilities has operated in for many years. The Transaction further diversifies Liberty Utilities' electric, gas, and water utility operations and provides an entry into two new markets in Oklahoma and Kansas.
Empire's management team will strengthen Liberty Utilities'
leadership team, particularly in the mid-states region. Both companies have compatible cultures with a focus on safety, reliability, customer service and efficiency.
Commitment to Empire's Communities, Customers and Employees
Following the close of the Transaction, Empire will continue to be regulated by the State Commissions, the FCC and the FERC and will continue to operate under the Empire name. The transaction will not affect Empire's customers or their rates paid for service. APUC intends to maintain the existing Empire operating and management structure within its Liberty Utilities umbrella. No changes to management or employee staffing at Empire are expected as a result of the Transaction, and Empire will maintain its existing headquarters location in Joplin, Missouri. Following closing of the Transaction, APUC expects to consolidate existing Liberty Utilities operations in the region under the Empire senior leadership. In addition, Liberty Utilities has pledged that Empire will maintain its historic levels of community involvement and charitable contributions and support in its existing service territories.
Acquisition Financing
APUC has obtained a US$1.6 (C$2.2) billion fully committed bridge debt financing from CIBC Capital Markets, J.P. Morgan, Scotiabank, and Wells Fargo to finance the Transaction. Permanent financing is expected to be obtained by placements of common equity, preferred equity, convertible debentures and long term debt, along with the assumption of existing Empire indebtedness.
The timing of remaining financing activities will be influenced by the regulatory approvals process and is subject to prevailing market conditions.
Advisors
Wells Fargo Securities, LLC acted as lead Merger Advisor and JPMorgan acted as lead Financial and Strategic Advisor to APUC. Husch Blackwell LLP served as transaction legal counsel and Choate Hall & Stewart LLP served as finance legal counsel to APUC.
Moelis & Company LLC acted as exclusive financial advisor to Empire. Cahill Gordon & Reindel llp served as legal counsel to Empire.
Teleconference Calls
APUC will host a conference call for investors and analysts at 4:30 pm Eastern Time on February 9th to discuss the Transaction. Analysts and investors can participate in the conference call by calling 416-847-6330 or toll free 1-866-530-1553 and entering passcode 7046446.
For those unable to attend the live call, a digital recording will be available for replay two hours after the call by dialing 1-888-203-1112 or 647-436-0148, access code 7046446, from Friday, February 9, 2016 until Tuesday, February 23, 2016.
Presentation slides for the conference call are available on the APUC website at www.algonquinpower.com.
Empire will host a conference call for investors and analysts at 1:00 pm Eastern Time on February 11th to discuss the Transaction. Analysts and investors can participate in the conference call by calling 1-888-243-4451 (within the United States) or 1-855-669-9657 (within Canada) or 1-412-542-4135 (outside North America) and ask to be joined to the Empire District Electric Company call.
For those unable to attend the live call, a digital recording will be available for replay one hour after the call by dialing 1-877-344-7529 (within the United States), 1-855-669-9658 (within Canada) or 1-412-317-0088 (outside North America), access code 10081053, from Thursday, February 11, 2016 until Thursday, February 18, 2016.
Presentation slides for the conference call will be made available on the Empire website at www.empiredistrict.com.
About Algonquin Power & Utilities Corp.
Algonquin Power & Utilities Corp. is a $4.8 billion North American diversified generation, transmission and distribution utility. The Distribution Group provides rate regulated water, electricity and natural gas utility services to approximately 560,000 customers in the United States. The Generation Group owns a portfolio of North American based contracted wind, solar, hydroelectric and natural gas powered generating facilities representing more than 1,100 MW of installed capacity. The Transmission Group invests in rate regulated electric transmission and natural gas pipeline systems in the United States and Canada. APUC delivers continuing growth through an expanding pipeline of renewable energy development projects, organic growth within its regulated distribution and transmission businesses, and the pursuit of accretive acquisitions. Common shares and preferred shares are traded on the Toronto Stock Exchange under the symbols AQN, AQN.PR.A and AQN.PR.D. Visit APUC at www.AlgonquinPowerandUtilities.com and follow us on Twitter @AQN_Utilities.
About The Empire District Electric Company
Based in Joplin, Missouri, The Empire District Electric Company (NYSE:EDE) is an investor-owned, regulated utility providing electricity, natural gas (through its wholly owned subsidiary The Empire District Gas Company), and water service, with approximately 218,000 customers in Missouri, Kansas, Oklahoma, and Arkansas. A subsidiary of Empire also provides fiber optic services. For more information regarding Empire, visit www.empiredistrict.com.