Westar Said to Get Bid Interest From Ameren, Canadian Funds

  • Kansas power company working with Guggenheim on sale process
  • Borealis Infrastructure, Canada Pension may also make bid

Westar Energy Inc., the biggest electric utility in Kansas, has drawn takeover interest from rival Ameren Corp. as well as an investor consortium that includes Borealis Infrastructure Management Inc. and the Canada Pension Plan Investment Board, according to people familiar with the matter.

Westar is working with Guggenheim Partners to field interest, the people said, asking not to be identified because the discussions aren’t public. Initial bids for the utility, which has a market value of about $7 billion, are due next week, they said.

No final decision has been made on the bids, and other companies may also consider making an offer, the people said.

The utility’s shares climbed 1.8 percent to $50.61 at the close in New York. Earlier, they jumped as much as 6.2 percent.

Representatives for Borealis, Canada Pension, Westar, Guggenheim and Ameren declined to comment.

Regulated Utilities

Westar is considering a sale amid a flurry of takeover activity in the U.S. utilities market. Large power producers are looking to offset tepid growth by buying smaller peers. Regulated utilities, such as Westar, are particularly attractive as they own or control the entire flow of electricity from generation to meter.

An industry shift away from unregulated power sources such as coal and nuclear energy is also driving activity.

Pension funds and other infrastructure investors have been seeking to acquire utilities because they tend to have stable, predictable returns.

Canadian buyers have been particularly active in the industry. In February, Fortis Inc. agreed to buy ITC Holdings for roughly $7.1 billion, on the same day that Algonquin Power & Utilities Corp. agreed to buy the Empire District Electric Co. for $1.5 billion.

Last September, Halifax-based Emera Inc. agreed to acquire TECO Energy Inc. for $6.5 billion.

Toronto-based Borealis, which manages infrastructure investments for the Ontario Municipal Employees Retirement System, recently expressed interest in buying electricity company ITC Holdings Corp. and natural gas utility SourceGas LLC, according to people familiar with the matter.

Limited Opportunities

The trend is largely due to limited opportunities in the sector for growth, in particular in Canada, Thomas Kurfurst, head of global power and utilities investment banking at the Bank of Nova Scotia, said in an interview last month.

“Most boards and management teams understand that you’re either going to be an acquirer or you’ll be acquired,” he said.

“If it is a fait accompli that you’re going to be acquired, this is probably the best time to consider selling yourself.”

Scotiabank advised Fortis and Emera on their transactions.

Ameren provides electrical transmission and natural gas delivery to more than 3 million customers in Missouri and Illinois, according to its website. Buying Westar would expand the St. Louis-based company into neighboring Kansas and grow its transmission business.

Westar operates more than 34,000 miles of electrical transmission and distribution lines servicing close to 700,000 customers, according to its website.

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