Dive Brief:
- Australia’s Macquarie Group has backed out of the proposed purchase of Cleco Corp.’s Louisiana regulated electric utility when co-investors reportedly hesitated over the the utility’s high share price, low growth prospects and expected low returns.
- After Spanish utility Iberdrola SA, the other potential bidder, had already dropped out, the latest announcement drove Cleco Corp’s NYSE share price down 6.4% to $50.01, reportedly giving the company a market value of about $3.02 billion. Analysts say the utility must soon decide whether or not to pursue a sale.
- A Wells Fargo analyst told StreetInsider that talk of Cleco’s decline is an “overreaction” to the Macquarie and Iberdrola moves and there will be other bidders because it is “ripe for M&A.”
Dive Insight:
The reasons given for the Macquarie co-investors’ reluctance to buy recalls talk of the so-called "utility death spiral.”
Talk of a Cleco buy-out began in August when retiring CEO Bruce Williamson said the company, though not for sale, was fulfilling its fiduciary responsibility by retaining Goldman Sachs and Tudor Pickering Holt to help evaluate takeover offers. Williamson reportedly would potentially benefit if a change of control rather than retirement terminated his employment, according to a Louisiana Public Service Commission filing.
Cleco serves about 284,000 customers in Louisiana and supplies wholesale power in both Lousiana and Mississippi.
