Great Plains Energy Inc., the Missouri headquartered utility company announced on Tuesday that had made an agreement to acquire Kansas’ Westar Energy Inc. for around $8.6 billion.
Shareholders of Westar holders are to be paid a combined value of $60 per share, $51 in cash and $9 in Great Plains stock, currently a 13% premium to Westar’s end of trade price of $52.92 on Friday.
According to a statement the two businesses expect the deal to be complete by Spring 2017 pending regulatory and shareholder approval.
Terry Bassham, the chief executive and chairman of Great Plains said:
“The utility industry is facing rising customer expectations, increasing environmental standards and emerging cybersecurity threats. These factors, coupled with slower demand growth for electricity, are driving our costs and customer rates higher.”
Bassham also stated that potential savings from the deal will help the businesses reduce the amount of rate increases for customers. On completion, the combined group will have over 1.5 million customers across Kansas and Missouri.
Current CEO of Westar, Mark Ruelle will stay in his role until the transition is complete whilst Bassham will then takeover as the chairman and CEO of the merged business. Great Plains is planning to bring one Westar director to its board.
The agreement which has been made between Great Plains and Westar outlines termination fees which at minimum are $80 million rising as high as $380 million dependent on scenario. If the deal was to fail due to either shareholders not approving the deal, Great Plains may be required to pay Westar $80 million. If the deal fails to get regulatory approval by May 31 2017, subject to extension, Great Plains may have to pay a fee of $380 million. If Westar accepted a superior takeover bid it would be forced to pay Great Plains $280 million.
Shares of Great Plains’ have increased by 14% during the year whilst shares of Westar have risen by 25%.