U.S. utility Allete ALE-N said on Monday that it had agreed a deal with investment firms Global Infrastructure Partners and CPP Investments to be taken private at a US$6.2-billion valuation, inclusive of debt.
The transaction is a rare example of a U.S. utility being taken private by investment firms, and comes at a time when such companies are receiving increased investor interest as technological innovations, such as artificial intelligence and data centres, boost power demand.
For utilities such as Allete, this hunger for power comes as they are implementing a shift to greener forms of generation, creating the need for significant investment in their networks.
Allete chief executive officer Bethany Owen told Reuters that the Minnesota-based company’s strategy involved spending US$4.3-billion on renewables over the next five years, and further billions on investments after that. Raising these sums, while being a smaller utility in the public markets, would have been challenging.
“We were looking for the right partners to provide ready access to capital so that we could execute that transformative strategy,” said Ms. Owen, who will continue in her role after the transaction closes in mid-2025.
The cash offer of $67 per share for Allete represented a 19-per-cent premium to the company’s closing share price on Dec. 4, a day before Reuters reported the power company was exploring a sale.
“This is a modest premium on several angles,” said Guggenheim utilities research analysts, adding this “unique” deal would not set a precedent for other go-private deals.
Shares of Allete initially rose following the deal announcement, but were 1.6 per cent lower in midafternoon trading.
Allete has nearly 188,000 customers in northern Minnesota and northwestern Wisconsin and also operates wind, solar, coal-fired, biomass and hydroelectric power generation assets across the Upper Midwest.