Dive Brief:

• Great Plains Energy and Westar Energy have proposed an amended merger agreement that would create a company with a combined equity value of $14 billion.

• The stock-for-stock merger would involve no acquisition premium and no acquisition debt.

• The new company – the name has not yet been decided – would have 1 million customers in Kansas and nearly 600,000 customers in Missouri.

Dive Insight:

The previous merger attempt between Westar and Great Plains failed in April when the Kansas Corporation Commission rejected the deal, saying, among other things, that the acquisition premium was too high. Critics of the merger deal said Great Plains overpaid for Westar by as much as $4.9 billion. 

The new, amended deal aims to alleviate that concern.

Under the terms of the deal agreed upon by the board of directors of both companies, Westar shareholders would receive one share in the new company for each Westar share. Great Plains shareholders would receive 0.5981 shares in the new company for each Great Plains share.

The formula reflects the agreed-upon ownership split between the two companies. Upon completion of the merger Westar shareholders would own approximately 52.5% and Great Plains shareholders approximately 47.5% of the new company.

The agreement also calls for Great Plains to redeem all of the previously issued debt and convertible preferred stock it issued in connection with the previous plan to acquire Westar.

The companies say combining the companies will make “significant efficiencies available” and afford the utilities “a better opportunity to earn their allowed returns without having to resort only to rate increases.”

They say the combined company would have a strong balance sheet and improved free cash flows, “thereby creating a robust business platform to pursue new sustainable growth opportunities including investments in additional renewables and transmission assets.”

The combined company also plans to implement a share repurchase program after closing “to rebalance the company’s capital structure and effectively deploy cash.”

The deal also call for the new company to provide a minimum of $50 million in total rate credits for all customers upon the closing of the transaction in the form of a one-time rate reduction.

“We are confident we have addressed the regulatory concerns with our originally proposed transaction,” Mark Ruelle, president and CEO of Westar Energy, said in a statement.

“We are pleased to announce a revised agreement with Westar Energy that we believe directly addresses regulatory concerns with our originally-proposed transaction, while increasing the long-term value and upside opportunity for our shareholders, customers, communities and employees,” Terry Bassham, chairman, president and CEO of Great Plains Energy, said in a statement.

Upon closing, Ruelle will become the non-executive chairman of the new company board. Bassham will serve as president and CEO and also serve as a member of the board of directors.