Topeka The two largest electric utilities in the area announced a revised merger proposal Monday that they promised would result in immediate cash savings for their customers.
Westar Energy, based in Topeka, and Great Plains Energy, the parent company of Kansas City Power and Light, vowed Monday that if Kansas utility regulators allow the deal to go through, the new combined company would provide a minimum of $50 million in rate credits to its customers as soon as the deal closes.
“So confident are we in the savings and the efficiencies that will come from this transaction that we will provide immediate bill credits of at least $50 million to all of our customers of both companies in both states before we’ve actually realized that level of savings ourselves,” Westar president and CEO Mark Ruelle said during a news conference outside his company’s headquarters in Topeka.
In April, the Kansas Corporation Commission rejected a proposal for Great Plains to buy out Westar for an estimated $12.2 billion in cash and stock. That deal would have included a $4.9 billion premium paid to Westar shareholders, and it would have required Great Plains to take out significant new debt.
The KCC said that deal would not have been in the best interests of Kansas customers because it would have put the new, combined company in a significantly weaker financial position and likely would have led to layoffs and poorer service. But the commission also encouraged the two companies to continue negotiating toward a better deal.
The new proposal, the two companies said Monday, does not involve either company acquiring the other. In what they have termed a “no-premium merger of equals,” valued at about $14 billion, an entirely new company would be formed whose name has not yet been decided. Westar shareholders would receive one share in the new company for every share of Westar stock they own, while Great Plains shareholders would receive 0.5981 shares in the new company.
“With this transaction, no, Westar shareholders will no longer get an immediate $60 as they would have under the previous agreement, but they will get a 15 percent increase in their dividend and a better earnings growth and investment profile than we would on a stand-alone basis,” Ruelle said.
That means Westar shareholders would own about 52.5 percent of the new company, and Great Plains shareholders would own the other 47.5 percent.
Ruelle would stay on as the new company’s nonexecutive chairman while Great Plains president and CEO Terry Bassham would continue in that role.
The companies also promised that there would be no layoffs as a result of the merger and the new company would maintain a minimum of 500 employees at the Topeka headquarters for at least five years.
“We’ve said from the beginning that we’re not looking just for any deal, but a deal that significantly benefits our employees, shareholders, customers and communities,” Bassham said. “After hearing the KCC’s concerns and keeping that goal in mind, this revised deal is that deal.”
Westar spokeswoman Gina Penzig said the companies plan to formally file the new merger application within the next few weeks. Once they do, under state law, the KCC will have 300 days to either approve or deny it.
In a joint press release, the companies said they expect the transaction to close in the first half of 2018.