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Aquila, UtiliCorp at Share Purchase Impasse

Aquila, UtiliCorp at Share Purchase Impasse

UtiliCorp United wants to buy the rest of Aquila Gas Pipeline Corp. it doesn't already own, but the companies cannot agree on a deal. UtiliCorp currently owns about 82% of Aquila Gas Pipeline's outstanding common shares.

On Nov. 10, UtiliCorp proposed acquiring the 5.4 million shares of the pipeline held by the public for $8/share. UtiliCorp has been in talks with a special committee of independent directors of Aquila Gas Pipeline.

UtiliCorp also said it is reviewing its options, including whether to proceed with an offer directly to the public for the shares. Such an offer could be equal to, lower than, or higher than the $8/share proposed in November.

Based in San Antonio, TX, Aquila Gas Pipeline gathers, processes and markets gas and gas liquids through its gathering systems and gas processing plants in Texas and Oklahoma. The company is about 82% owned by Aquila Energy Corp., a wholly-owned subsidiary of UtiliCorp United. The remaining shares were sold to investors in an initial public offering in 1993. An attorney representing the Aquila Gas Pipeline special committee declined to comment on the negotiations with UtiliCorp. A UtiliCorp spokesman could not be reached for comment by press time Monday.

In March 1998 Aquila Gas Pipeline hired Merrill Lynch & Co. to assist in a possible sale of the company (see Daily GPI March 11, 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. "Consolidations within the pipeline industry in the past few years signaled that it may be in the best interest of our stockholders to consider selling the company. Since March we have gone through an exhaustive process and determined that more shareholder value can be achieved through continued growth," said Aquila Gas Pipeline CEO Joe Becraft.

Last month, Aquila Gas Pipeline said it would cut 60 people from its staff of 310 and take a $1.7 million pre-tax charge to earnings (see Daily GPI March 3, 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.

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