Shareholders in Puget Energy overwhelmingly approved a plan to sell the company to Australian and Canadian investors for $30 a share.
Puget Energy shareholders voted on Wednesday in favor of the utility company’s takeover by a consortium of Australian and Canadian investors.
At a meeting in the Bellevue headquarters of the state’s largest electric and gas utility, chief executive Stephen Reynolds said 97 percent of voting shareholders approved the takeover, which would pay them $30 per share. About 80 percent of the company’s 129 million shares were represented, he said.
The vote is “just one step in the ongoing process” facing the planned acquisition, said Reynolds.
The deal, which values Puget Energy at $7.4 billion, must pass muster with the Washington Utilities and Transportation Commission and with federal regulators. The company expects to complete the regulatory approvals in the second half of 2008.
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Macquarie Infrastructure Partners, which last October bid led the bid to acquire Puget Energy, has said it plans to stick to the company’s current growth plan. The company’s management team will stay in place.
“It is not a merger intended to replace people” or produce layoffs, Reynolds told a hall packed with more than 200 Puget Energy shareholders. “It’s intended to provide financial strength.”
“It will be business as usual, but better,” said Macquairie chief executive Christopher Leslie. “Do we have plans that are different from what the company’s dream might be? Absolutely not.”
The take-over has been cast by Puget Energy’s leadership as an opportunity to get a backer with pockets and patience deep enough to bankroll massive infrastructure investments the utility says are necessary.
Many analysts and proxy-advisory firms have given their blessing to the deal, which offered shareholders a 25 percent premium over the stock’s value the day it was announced.
Nevertheless, the proposal has raised concerns among the utility’s customers about potentially higher rates. And some shareholders at the meeting said they would have liked a higher price for their stock.
“I liked the idea of owning the local power company,” said Charles Kirschbaum of Auburn, a retired electronics technician who has owned Puget Energy stock for 15 years. “Now they took it all away for a meager $30 a share.”
Reynolds downplayed these concerns, saying the price was fair. Dividends will continue to be paid until the transaction closes.
Puget Sound Energy needs to invest some $5 billion in infrastructure over the next five years to keep up with growth in the region and with government mandates to increase its use of renewable electricity sources, officials say. The buyout would give it the financial backing to add capacity without relying on capricious stock markets, said Reynolds.
Macquarie Infrastructure Partners is part of Autralia’s sprawling Macquarie Group. Three Canadian pension funds — the Canadian Pension Plan Investment Board, the British Columbia Investment Management Corporation, and Alberta Investment Management — are also part of the consortium bent on acquiring Puget Energy.
Last year Macquarie led the acquisition of Pittsburgh-based Duquesne Light, a regulated electric utility. It also runs ports and water and gas providers in Canada and the U.S.
The Macquarie deal comes amid increasing private equity interest in energy providers, which can provide consistent cash returns despite being subject to price controls.
Last year, prominent private equity firm Kohlberg Kravis Roberts (KKR) led a consortium that bought Texas’ largest utility, TXU, for $32 billion. Some shareholders though the utility was being sold too cheaply, but market turmoil helped pave the way for the takeover. At the time of their proposal, KKR executives told Texas legislators that they intended to keep the company for at least five years.
Macquarie’s Leslie said the nature of the consortium buying Puget Energy guaranteed that its commitment will be long-lasting.
“Pension funds like utilities because they’re long term,” Leslie said.