Great Plains and Westar to merge in debt-free, stock for stock deal

By Devika Patel

Knoxville, Tenn., July 10 – Great Plains Energy Inc. plans to merge with Westar Energy, Inc. in a revised stock-for-stock transaction that will now be debt-free.

The companies had negotiated a previous merger transaction which was announced May 31, 2016. That deal was to be conducted at a premium, with debt, and was rejected by the Kansas Corporation Commission on April 19 and then again after reconsideration on May 23.

In the new plan, Great Plains’ leadership intends to retire all of its debt, repurchase its mandatorily convertible preferred stock and terminate its bridge commitments.

“We’ll move promptly, well before close, to unwind the debt and mandatorily convertible preferred stock,” president and chief executive officer Terry Bassham said on the companies’ conference call announcing the transaction on Monday.

“We’ll submit redemption notices for the Great Plains Energy senior unsecured notes and mandatorily convertible preferred stock originally issued in March 2017 and October 2016, respectively.

“We’ll terminate the remaining bridge commitments and mandatorily convertible preferred stock purchase agreement,” he said.

Bassham said Great Plains will no longer need the funds from its completed acquisition financing and that the transaction is structured to be debt-free.

“With the stock-for-stock merger, the transaction will be debt-free,” Great Plains chairman of the board,” Bassham said.

“With the stock-for-stock merger, our previously completed acquisition financing is no longer required,” he said.

Bassham stated that the company would have about $1.25 billion in cash at closing.

“We’ll wait until after closing to rebalance our capitalization toward common equity,” he said.

“That means we’ll bring to the closing about $1.25 billion in cash,” he said.

Management expects the new company will have an investment-grade profile.

“The new company will benefit from strong balance sheet and significant cash flow,” Bassham said.

“The projected debt-to-capital metrics remain strong.

“The new company’s strong investment-grade profile and cash position will create financial flexibility for targeted investments and capital returns, including planned, post-closing share repurchases to rebalance our capital structure and provide a catalyst for the shares,” Bassham said.

The transaction is expected to close in the first half of 2018.

Kansas City, Mo.-based Great Plains is the holding company of Kansas City Power & Light Co. and KCP&L Greater Missouri Operations Co. Westar is a Topeka, Kan.-based electric utility.

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