Kansas City Power & Light Rejects Rival Bid
Kansas City Power & Light Co. said Tuesday that its board unanimously rejected Western Resources Inc.’s sweetened $1.9-billion merger bid, and industry analysts said they expect a hostile battle for the utility.
Kansas City Power’s board, saying Western’s offer was not in the best interest of its shareholders, also reiterated its support for a merger with UtiliCorp United Inc., whose proposal will be submitted to both companies’ shareholders at special meetings this summer.
But Western said it will proceed with its offer despite Kansas City Power’s resistance, and analysts said individual investors might side with Western, whose offer is worth $31 per share.
Both Kansas City Power and UtiliCorp, which is a gas as well as an electric utility, are based in Kansas City, Mo. Western Resources, which supplies gas and electricity to customers in Kansas and Oklahoma, is based in Topeka, Kan.
Late last month, UtiliCorp raised its bid to between $28 and $29 a share in UtiliCorp stock, or about $1.7 billion. It said Tuesday that it would not raise it again.
“I don’t think they are going to go along with management on this one,” William Tilles, Smith Barney utility analyst, said of Kansas City Power’s individual investors. “We talk to the retail brokers and there is no ambiguity on the part of retail investors as to which is the superior offer and which way they are leaning.”
He said the next step is Western’s expected launch of a formal hostile tender offer once it gets the necessary proxy material approval from the Securities and Exchange Commission, due in a week or two.
Kansas City Power Chairman Drue Jennings said in a statement that Western’s bid was based on “faulty assumptions” that raised questions about future dividend prospects and financial forecasts.
Among its objections, the utility cited rate reduction proceedings in which Western Resources is currently involved.
Under the revised offer Western made last week, Kansas City Power stockholders would receive a cash dividend of $2 to $2.35 per share of Kansas City Power stock after a merger, based on Western Resources’ projected 1998 annual dividend. That would be above the $1.85-per-share payout expected by UtiliCorp.
Kansas City Power stock slipped 62.5 cents to $26.875, while Western Resources added 12.5 cents to $29.375 and UtiliCorp gave up 12.5 cents to $27, all trading on the New York Stock Exchange.
