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Terms of Aquila Breakup Deals 'Despicable' to Major Shareholder

Pirate Capital LLC, owner of about 17.6 million shares of Aquila Inc. -- the target of two friendly acquisitions announced this week -- said Friday it opposes Aquila's proposed deals with Great Plains Energy and Black Hills Corp. (see Daily GPI, Feb. 8).

Thomas R. Hudson Jr., portfolio manager of Norwalk, CT-based Pirate, wrote to Aquila CEO Richard Green to express his opposition to the dual deal.

"As we have previously stated, we are extremely dissatisfied that the deal with Great Plains Energy and Black Hills Corporation was accepted by management, and cannot believe that such despicable terms for ILA [Aquila] shareholders were even entertained," Hudson wrote.

"While we have heard repeatedly that this deal is favorable for ratepayers and ILA customers, we must remind you that your allegiance should reside with ILA shareholders," Hudson's letter continued. "It is shocking that you would expect ILA shareholders to suffer additional losses while you and your cohorts receive hearty severance packages. We will not complacently sit by and allow the further deterioration of ILA shares, and we demand that the current deal be nullified immediately. Either both Great Plains Energy and Black Hills Corporation present a more enticing acquisition offer for ILA shareholders to consider, or the Company must continue to operate as a stand alone entity."

Earlier, during a Wednesday analyst conference call, Green touted the deal.

"Before arriving at today's announcement, the board and management of Aquila conducted an extensive [auction] process, and we believe that the transactions announced today with Great Plains and Black Hills represent the best outcome for our shareholders and the greatest opportunity for our customers, employees and the communities that we serve," Green said, noting that Aquila shareholders will receive an annual dividend on Great Plains shares, post transaction, in addition to the cash consideration of the deals. The Great Plains dividend is currently $1.66/share.

Aquila spokesman Al Butkus told NGI Friday that the company had no statement to make on Hudson's letter.

In his letter, Hudson reminded Green that Aquila "has already lost hundreds of millions of dollars" under his watch and told him to rework the deals or get out.

"As you are well aware, we have had numerous conversations with other institutional ILA investors and not a single shareholder we have spoken with supports this deal under the current terms," Hudson said. "We strongly urge you to nullify the deal immediately, reevaluate your commitment to ILA shareholders, and either resign from the Company or get back to the drawing board to negotiate a better deal."

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