Western Resources Makes Bid for KCPL
Western Resources Inc. offered to buy Kansas City Power & Light Co. in a $1.7-billion deal aimed at breaking up a friendly merger proposed between KCPL and UtiliCorp United Inc.
In announcing the offer Sunday, Western Resources’ chairman, John Hayes Jr., said a merger would result in a stronger company with deeper rate cuts for electric and gas customers in Missouri and Kansas. Hayes also said the combination would not result in any layoffs.
Hayes said the combination would save more than $1 billion in the first 10 years, or 64% more than in a proposed KCPL merger with UtiliCorp.
Hayes and Drue Jennings, KCPL’s chairman, spoke with each other about the deal Sunday.
“I simply informed him and urged him to discuss the proposal with his board and get back to us next week,” Hayes said.
Topeka, Kan.-based Western Resources asked for a response by next Monday, or a month before the May 22 shareholders vote scheduled on the UtiliCorp-KCPL deal.
KCPL has rejected Western Resources before. The companies talked for three months in 1994 about merging, but KCPL ended the negotiations, according to documents filed with the Securities and Exchange Commission.
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In a statement issued Monday, KCPL said its board would make a prompt review of the offer.
Under the offer, KCPL shareholders would trade each of their shares for $28 of Western Resources’ shares.
In trading Monday on the New York Stock Exchange, KCPL jumped $2.125 to $26; Western Resources fell 25 cents to $28.875; and UtiliCorp was down 12.5 cents at $28.125.
The KCPL agreement with UtiliCorp, announced in January, would create a company with 2 million gas and electric customers from Kansas City to Australia.
Analysts had said the UtiliCorp-KCPL deal was a good idea because KCPL was profitable and UtiliCorp had aggressive management. Hayes said his company is financially sounder than UtiliCorp.
“It was either now or never for Western Resources to make an offer,” said Barry Abramson, a utility company analyst with Prudential Securities Inc. in New York. “It was either that or stay on the sidelines and not be involved.”
In a separate utility deal announced Monday, Texas Utilities said it agreed to buy Enserch Corp., an integrated natural gas company, for $1.7 billion.
The stock of Dallas-based Enserch jumped $4.375 to $20.75; Texas Utilities slipped 12.5 cents to $39.50. Both trade on the New York Stock Exchange.
Before completion of the transaction, which will consist of about $550 million of Texas Utilities common stock and about $1.15 billion in debt and preferred stock, Enserch’s exploration and production company, Enserch Exploration Inc., will be spun off to its shareholders.
