UtiliCorp Taking AQP Offer to Shareholders
After negotiations with a special committee of Aquila Gas Pipeline (AQP)
directors on an acquisition offer failed last week, UtiliCorp United Inc.
launched an $8.00 per share cash tender offer directly to shareholders
on Friday for all outstanding shares of the midstream operation. Kansas
City, MO-based UtiliCorp already owns about 82% of AQP; the public owns
about 18%, or 5.4 million shares.
UtiliCorp said completion of the tender depends upon attaining 90% ownership
of AQP. But completion of the tender is not conditioned upon financing
or any approval by AQP's board of directors or any of its committees. The
offer is scheduled to expire at the end of the month.
So why does UtiliCorp want all of AQP? "We feel that it would help
us maintain strategic direction of the company and make it as efficient
as possible," said UtiliCorp spokesman Ethan Hirsh. "There would
be some savings in corporate and headquarters functions, that sort of thing."
Some staff cuts could come if UtiliCorp is successful in its bid, Hirsh
said. But most of the savings would come from eliminating AQP's cost of
operating as a publicly traded company. "There's a lot of reporting.
There's shareholder reporting and records, all those sort of things."
On Nov. 10, UtiliCorp proposed acquiring the 5.4 million shares for $8.00
per share. At that time, a special committee of the AQP board, consisting
of two independent directors, was formed to negotiate the deal. UtiliCorp
said the $8.00 per share offer reflects a premium of about 23% of AQP's
Nov. 11 closing price of $6.50.
Aquila Gas Pipeline closed unchanged at $8/share Friday. The stock traded
between 7 15/16 and 8 Friday on volume that was nearly 26 times normal.
The stock's 52-week range is 4 5/8 to 19.
Shares not tendered in the offer would be acquired through a merger
in which the remaining shareholders would receive the same price paid in
the tender offer. Timing and terms of the merger will depend on results
of the tender.
Based in San Antonio, TX, AQP is a midstream gas company that was spun
off by UtiliCorp in 1993. In March 1998 AQP hired Merrill Lynch &Co.
to assist in a possible sale of the company (see NGI
March 16, 1998). Then in August it took itself off the auction block,
citing low prices for natural gas liquids, which created a soft market
for the company (see NGI August 10, 1998).
Last month, AQP said it would cut 60 people from its staff of 310 and
take a $1.7 million pre-tax charge to earnings (see NGI
March 8, 1999). Last year the company fell prey to low commodity prices.
For the year, net income was $4.9 million, compared to 1997 net income
of $25.2 million. Cash flow from operations was $32.6 million in 1998,
down from $56.7 million in 1997.
Joe Fisher, Houston
©Copyright 1999 Intelligence Press, Inc. All rights reserved.
The preceding news report may not be republished or redistributed in whole
or in part without prior written consent of Intelligence Press, Inc.