Hedge fund ramps up opposition with Web site against Aquila sale
KANSAS CITY, Mo. --Connecticut-based Hedge fund Pirate Capital LLC on Wednesday announced it had started a Web site dedicated to generating opposition to the pending sale of utility
Kansas City-based Aquila, which owns electric and gas utilities in Missouri, Colorado, Kansas, Nebraska and Iowa, announced in February it plans to sell its assets to Great Plains and
Aquila and Great Plains on Wednesday said they had applied for regulators for approve the acquisition.
But Pirate Capital of Norwalk, Conn., which controls about 5 percent of Aquila's shares, has criticized the deal, saying it will shortchange shareholders and that it believes Aquila is worth up to $5.50 per share.
The Web site (http://www.badaquiladeal.com) repeats many of those criticims and lays out its case why an auction process the company used last year to find a buyer was flawed.
Aquila officials say they approached nine potential bidders, five of whom submitted initial offers, but four dropped out after looking at the numbers.
Under the deal, Black Hills will pay about $940 million in cash for Aquila's electric utility in Colorado and its gas utilities in Colorado, Kansas, Nebraska and Iowa.
Great Plains will then acquire all the outstanding shares of Aquila for about $1.7 billion in cash and stock. Great Plains also will assume about $1 billion in Aquila's debt.
Pirate Capital claims Aquila should have done more to find interested buyers or generate greater value, such as selling the company in pieces.
"The end result: (Great Plains) negotiated a sweetheart deal for control of Aquila," the hedge fund said.
Instead, the hedge fund argues the company should reject the sale and rebuild itself as a holding company for the Missouri assets and remaining nonregulated properties. That would lower operational costs, improve investment ratings, reduce debt and allow the company to pay dividends.
Aquila spokesman Al Butkus said the company was reviewing Pirate Capital's information and couldn't comment. The company expects shareholders to vote on the deal in the third quarter.
Richard Green, Aquila's chief executive, last month said that while Aquila has sold a number of utilities and other assets over the past few years to reduce crushing debt built up as it invested in unregulated businesses, the company had determined selling the company piecemeal wasn't viable.
The announcement came after markets closed Wednesday. During trading on the New York Stock Exchange, Aquila shares remained unchanged at $4.19 while Great Plains Energy shares lost 10 cents to $32.83.
