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Energy West Drives Wedge Into FPU-Chesapeake Utilities Merger

Natural gas utility company Energy West Inc. took steps Monday to put a wedge between Florida Public Utilities Co. (FPU) and a subsidiary of Chesapeake Utilities Corp. (CPK), which seek to merge, by demanding that FPU turn over a list of its shareholders to Energy West, a minority holder of the outstanding shares of FPU.

In a filing with the Securities and Exchange Commission (SEC), Energy West CEO Richard M. Osborne "demand[ed] a copy of the list of shareholders of FPU pursuant to the Florida Business Corporation Act," which requires FPU or its agent to maintain a record of its shareholders in alphabetical order by class of shares, revealing the number and shares held by each.

"Energy West is entitled to such a list. Energy West wishes to examine the list for the purpose of communicating with FPU shareholders regarding the affairs of FPU, including the upcoming special meeting of shareholders related to the proposed merger with Chesapeake Utilities Corp.," Osborne told the SEC.

Montana-based Energy West, which serves approximately 36,000 natural gas customers in Montana, Wyoming, Maine and North Carolina, reported that it owns 394,522 shares of common stock at $1.50/share in FPU.

CPK and FPU announced the proposed merger in April, a move that would create a $595 million combined energy company serving 200,000 customers in three states (see Daily GPI, April 21).

Under terms of the all-stock transaction, holders of FPU common stock will receive 0.405 shares of CPK common stock in exchange for each outstanding FPU share. Based on the average of CPK's closing stock price on the 15 trading days prior to April 15, the transaction has an approximate value of $12.20/FPU share. The companies said they expect the transaction to be earnings neutral or slightly accretive in 2010 and meaningfully accretive in 2011.

The merger is intended to qualify as a tax-free reorganization and is subject to approval by shareholders of both companies. The merger was approved by both companies' boards of directors in April. It requires the approval of federal and state regulatory authorities. The companies hope to close the transaction during the fourth quarter.

At the close of the merger FPU would become a wholly owned subsidiary of CPK and would initially continue to operate as a separate business unit. Over time, FPU and Central Florida Gas -- a division of CPK -- would integrate their operations, conducting business under the name Florida Public Utilities. CPK CEO John Schimkaitis would become chairman and CEO of the new Florida Public Utilities. Current FPU CEO Jack English would be retained as a consultant for up to 24 months following the merger and two members of the current FPU board of directors would join the CPK board.

The company to be created by the merger would have approximately 117,000 natural gas customers, 31,000 electric customers and 48,000 propane customers in Delaware, Maryland and Florida. CPK and FPU reported $291.4 million and $168.5 million in revenues, respectively, and $13.6 million and $3.5 million in net income, respectively, for 2008.

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