Empire Electric sets June shareholder vote on $2.4 billion acquisition by Canadian utility

Joplin, Mo.-based Empire District Electric Co., which provides power and water to customers in rural northwest Arkansas, has scheduled a special shareholder’s meeting on June 16 to vote on Algonquin Power & Utilities Corp.’s (APUC) $2.4 billion offer to acquire the investor-owned utility.

Algonquin, based in in Oakville, Ontario (Canada), made a play to purchase the Joplin-based rural utility operator on Feb. 9, nearly two months after Empire announced it hired a financial advisor and was in the early stages of “exploring strategic opportunities” following speculation that the Missouri utility was on the block.

Under the terms of the all-cash deal, which has been unanimously approved by the board of directors of both companies, Empire’s shareholders will receive $34 per common and the Canadian utility giant will assume $900 million of the Joplin utility’s debt. The purchase prices represented a 21% premium to the closing price on Feb. 8, 2016, and a 50% premium to Empire’s unaffected share price on Dec. 10, 2015.

The unusual deal between the Canadian and Missouri utility is subject to customary closing conditions, including the approval of Empire’s common shareholders. It must also be approved by state and federal regulators, including utility commissions in Arkansas, Kansas, Missouri and Oklahoma. The Federal Communications Commission, the Committee on Foreign Investment in the United States and the Federal Energy Regulatory Commission most also sign off on the transaction since the deal involves a foreign purchaser of a U.S. power company tied to the nation’s energy grid.

In February, Empire filed a request with the Arkansas Public Service Commission to implement an environmental cost recovery rider for costs associated with new environmental facilities installed at the Asbury Power Plant in Jasper County, Mo. That rider resulted in increase of nearly $3.93 a month for residential Arkansas customers using 1,000 kilowatt-hours of energy. Empire has approximately 4,400 customers in Arkansas.

Empire and Algonquin officials expect the deal to close in the first quarter of 2017, once the waiting period under the Hart-Scott-Rodino Act ends. The Transaction is expected to close in Q1 2017. Once completed, Empire will become a wholly-owned subsidiary of Algonquin’s Liberty Utilities and will cease to be a publicly-held corporation. Empire said it expects to pay its regular quarterly dividends at the annualized rate of $1.04 per share until the deal closes.

Algonquin officials have said that the deal will add $3.2 billion of utility assets and 218,000 customers to Liberty Utilities’ current portfolio and result in a total asset base for the Canadian energy company of nearly $7 billion, an 87% increase. Algonquin’s business mix will also shift towards regulated utility operations, with earnings from regulated utility operations increasing from 51% to 72% on a pro forma basis, officials said.