Great Plains Energy’s (GXP -0.8%) proposed $8.6B purchase of Westar Energy (WR -0.1%) is being closely examined by Missouri regulators, who could derail the deal even as GXP says it does not need the state’s permission for the merger.
James Owen of the Missouri Office of Public Counsel contends that an earlier agreement between GXP and the state 15 years ago still requires any acquisition by the company to fall under Missouri jurisdiction.
Owens also notes that WR has operations in Missouri as part owner of a power company in Joplin, which means it is subject to the state’s oversight.
Great Plains Energy (GXP -1.9%) is downgraded to Underweight from Equal Weight with a $28 price target at Barclays, which foresees regulatory and financing hurdles associated with closing its proposed $8.6B acquisition of Westar Energy (WR +0.2%).
While GXP’s guidance is “defensible,” the regulatory calendar is very crowded and “the high sensitivity to financing costs the transaction employs through a great deal of leverage will cause the stock to underperform the utility group into the close of the transaction," Barclays analyst Daniel Ford writes.
The firm has an Equal Weight rating on WR and a $60 price target, assuming the merger closes within 12 months.
Ameren (AEE -0.2%) is preparing to make a final takeover offer for Westar Energy (WR +0.5%), which has asked interested suitors to submit binding offers by May 23, Bloomberg reports.
Great Plains Energy (GXP +0.2%) also may be interested in WR and has been seeking to partner with a financial investor such as a pension fund or infrastructure fund to help raise the cash necessary to buy its larger rival, according to the report.
WR, the largest utility in Kansas, reportedly has been considering a sale amid a flurry of U.S. utilities mergers prompted by tepid power demand and mounting costs.
Westar Energy (WR +2.3%) moves higher after a brief trading halt, following a Bloomberg report that the Kansas electric utility is getting interest from buyers.
Ameren (AEE -0.1%), which provides electrical transmission and natural gas delivery to 3M-plus customers in Missouri and Illinois, reportedly is interested, as well as an investor consortium that includes Borealis Infrastructure Management and the Canada Pension Plan Investment Board.
Initial bids for WR, which has a ~$7B market cap, are due next week, according to the report.