Mergers continue in the utility space
There was another merger in the utility space on May 31. Great Plains Energy (GXP) agreed to buy Westar Energy (WR). The total transaction is valued at $12.2 billion. It includes $3.6 billion of Westar Energy’s debt. The utility space has been busy with mergers and acquisitions. Utilities took the inorganic route to stay competitive in a highly challenging environment.
Terry Bassham, Great Plains’ chairman and chief executive, said that “Westar and Great Plains are trusted neighbors and have worked together for generations in Kansas. The combination of our two companies is the best fit for meeting our region’s energy needs.”
Is Westar Energy a strategic fit for Great Plains?
Great Plains Energy is the holding company of Kansas City Power & Light and Greater Missouri Operations Company. Westar Energy and Great Plains have been competitors for decades. They operate in Kansas. The deal is expected to expand Kansas City Power & Light’s geographical reach through its extended rate base. After the deal is complete, Westar Energy will operate as a wholly-owned subsidiary of Great Plains Energy. Management expects the deal to be complete by 2Q17.
Westar Energy shares rally, Great Plains Energy falls
Westar Energy shares rose on Tuesday. They reacted positively to the news. They closed at $56.26 and gained nearly 6.5%. However, investors dumped Great Plains Energy stock. Great Plains Energy closed after losing more than 5% on the same day.
Mergers in the utility domain are keeping up their pace this year. So far in 2016, Dominion Resources (D) agreed to acquire natural gas company Questar Corporation (STR). Also, Exelon Corporation (EXC) completed its acquisition of Pepco Holdings.