Fred Lum/The Globe and Mail
Investors led by Australia's Macquarie Group Ltd. agreed to buy Louisiana utility Cleco Corp. for $3.4-billion (U.S.) in cash, attracted by the steady, long-term returns of regulated power assets.
Macquarie, the largest private operator of U.S. utility assets, and Canadian fund manager British Columbia Investment Management Corp. will hold "the substantial majority" of Cleco when the deal is complete, according to an investor presentation posted online today. John Hancock Financial and other investors also joined in the deal, which includes the assumption of $1.3-billion in debt, the Pineville, Louisiana-based utility said in a statement today.
At $55.37 a share, the takeover values Cleco at 15 per cent more than its Oct. 17 closing price. The acquisition requires approval from state regulators, some of whom had voiced concerns over the sale of the utility formerly known as Central Louisiana Electric Co. Under the agreement announced today, the buyers will keep a presence in Pineville, maintain rates and employee headcount and put at least four Louisiana residents on the board.
"We believe these conditions are crafted to appease Louisiana state regulators," Paul Ridzon and John Barta, analysts for KeyBanc Capital Markets Inc., said in a research report for clients today.
Louisiana Native Bruce Williamson will be replaced as chief executive officer by Louisiana-native Darren Olagues, president of Cleco Power LLC and former chief financial officer of the company.
"The company listened to the concerns of the commission and I think they strove to meet those conditions as part of the actual deal that they struck," said Eric Skrmetta, chairman of the five-member Louisiana Public Service Commission. "On the face of it, it doesn't seem to have an impact to ratepayers or the community," Skrmetta said in a telephone interview.
Cleco gained 11 per cent to $53.52 at 1:27 p.m. in New York. Prior to the announcement, the utility had fallen 16 per cent since it first said it had received takeover interest in June.
The deal is expected to close in the second half of next year. Last month, Macquarie, a specialist in investing in regulated infrastructure assets, appeared to be faltering in its attempts to buy the utility because co-investors were skeptical of the returns, people familiar with the matter said at the time. Today, Macquarie lauded Cleco's prospects.
Jobs, Pensions "A well-run utility like Cleco, operating in an environment in which our experience and expertise can help drive additional growth, represents a very good opportunity for our investors," said Chris Leslie, CEO of the Macquarie Infrastructure Partners III fund.
Cleco owns 11 generating units with 3,340 megawatts of capacity and about 284,000 customers.
Louisiana Public Service Commissioner Clyde Holloway called for Williamson to resign, saying that the executive was only interested in selling the utility, according to a transcript of the commission's August meeting. The deal also requires approval from federal energy regulators.
"All parties including Cleco and Macquarie have a long row to hoe," Holloway said today in an e-mailed statement. Holloway said he wouldn't support a deal unless jobs, pensions and benefits are protected long-term and rates are maintained.
"Cleco's existing investors will receive an exceptional value for their shares to top off a superior total shareholder return of the past few years, and our customers and employees can expect us to retain our strong commitment to service and reliability," Williamson said today.
Cleco was advised by Goldman Sachs Group Inc. and Tudor, Pickering, Holt & Co. Macquarie Capital (USA) Inc. is advising the acquirers.