Great Plains Energy Inc. agreed to buy Westar Energy Inc., the biggest utility in Kansas, for $8.6 billion as power companies across the U.S., facing weak demand and rising operational costs, look to consolidate.
Great Plains, the parent company of Kansas City Power & Light, will pay $51 per share in cash and $9 per share in stock, Westar said Tuesday in a statement. The company will also assume $3.6 billion in debt, according to the statement. Great Plains Chief Executive Officer Terry Bassham will become chairman and CEO of the combined company, while Mark Ruelle will remain at the company until the deal closes.
The transaction comes amid a boom in utility mergers and acquisitions as customers using more energy-efficient appliances and resources such as rooftop solar flatten electricity demand. There were more than $52 billion worth of utility deals pending or completed across the U.S. last year, the most since 2011, data compiled by Bloomberg show.
“The combination of our two companies is the best fit for meeting our region’s energy needs,” said Bassham. “By combining our two companies, we are keeping ownership local and management responsive to regulators, customers and regional needs.”
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Westar delivers power to about 700,000 customers in Kansas and owns power plants capable of producing about 7,000 megawatts, according to the company’s website. It operates in a single state so regulatory approvals may not be as complicated to obtain as they have been for utility deals involving several jurisdictions.
Goldman Sachs Group Inc. will provide about $8 billion of debt financing for the deal, according to the statement.
Great Plains expects the accord to be neutral to earnings- per-share in the first full calendar year of operations and “significantly accretive” after that, according to the statement.
Westar had also drawn interest from Ameren Corp. and an investor group that includes Borealis Infrastructure Management Inc. and the Canada Pension Plan Investment Board, people familiar with the matter said last month, asking not to be identified because the information wasn’t public. Westar was working with Guggenheim Partners LLC on a possible sale, they said at the time.
Westar Chief Executive Officer Mark Ruelle fanned speculation about a takeover in November when he indicated the company would be open to a sale. Ruelle declined to comment on “rumors” surrounding the company during a first-quarter earnings conference call with investors on May 4.