PowerGen to Buy LG&E Energy for $3.2 Billion
Under the agreement, LG&E Energy will become the headquarters of PowerGen's operations in the United States, providing PowerGen with an entry into the American energy market and a strong platform for future growth, said Ed Wallis, PowerGen's chairman and CEO.
"This deal is a very exciting one for PowerGen, its shareholders and employees. Buying LG&E secures a stream of high quality, stable earnings which support shareholder value in the short term whilst providing us with the opportunity to grow our earnings in the future," Wallis said. "Of all the opportunities we have looked at, this is the one that has the greatest potential."
Under the terms of the agreement, LG&E Energy shareholders will receive $24.85 in cash for each share held. The purchase price represents a premium of 58% above the closing price of LG&E Energy shares on Friday, Feb. 25.
With a market capitalization of $4.1 billion, PowerGen ranks among the world's largest operator of generation and distribution assets. The company is lists on the London Stock Exchange.
Although regulatory approvals are pending, the combined PowerGen and LG&E Energy will have assets of nearly $12 billion and total revenues of $8.7 billion. It will serve nearly four million customers worldwide, with a work force of more than 13,000. It will have business operations on five continents and the Indian sub-continent, including 20 GW of generation capacity and more than 64,000 miles of transmission and distribution infrastructure.
"This transaction provides tremendous value for our shareholders, customers, employees and the Commonwealth of Kentucky," said Roger W. Hale, LG&E Energy chairman and CEO. "It is an outstanding opportunity for the company to enhance shareholder value. It also preserves LG&E Energy's strong presence as a major corporation in the state."
Hale will remain chairman and CEO of LG&E Energy and will join the PowerGen board of directors in London. LG&E Energy's current management team and structure will remain in place. Wallis and Hale said LG&E Energy's union contracts won't be affected by the transaction.
Upon completion of the acquisition, LG&E Energy becomes a wholly owned subsidiary of PowerGen. LG&E Energy and its subsidiary names will remain the same, and the company's headquarters for American operations will remain in Louisville, KY.
Wallis said PowerGen's American Depositary Receipts (ADR) will continue to be listed on the New York Stock Exchange, with each representing four ordinary shares.
The transaction must still be approved by the shareholders of each company, the U.S. Securities and Exchange Commission, Federal Energy Regulatory Commission, the Kentucky Public Service Commission, and the Virginia State Corporation Commission. The transaction is also subject to approval under the Hart-Scott-Rodino Act. However, Wallis and Hale said the companies believe the acquisition should close within nine to 12 months.
LG&E Energy is a Fortune 500 diversified energy services company with businesses in power generation and project development, retail gas and electric utility services, and asset-based energy marketing. The company owns and operates Louisville Gas and Electric, a regulated electric and gas utility serving 16 Kentucky counties, and Kentucky Utilities, a regulated electric utility, based in Lexington, which serves 77 Kentucky counties and five counties in Virginia.
LG&E Energy also owns interests in and operates non-utility power plants in six states and Spain. It owns interests in three natural gas distribution companies in Argentina, and owns CRC-Evans Pipeline International, the world's leading provider of specialty equipment and services to the natural gas and oil pipeline construction industry.
PowerGen is one of the U.K.'s leading integrated gas and electric companies, generating about 14% of the electricity needs of England and Wales. The company has a growing retail customer base of over 2.6 million customer accounts, is the market leader in provision of large scale combined heat and power plant and in the industrial and commercial electricity market. The U.K. business is split into five divisions: generation, distribution, combined heat and power, and distribution.
Edited by April C. Murelio
editor@poweronline.com