Evergy Taking Proposals For Sale of Company

Evergy plans to take proposals from potential buyers next month after pressure from activist investor Elliott Management to improve its operations or sell itself, according to a Bloomberg report.

Evergy plans to run a two-pronged strategic review as part of a settlement reached with Elliott in March, Bloomberg said. The review is focused on finding ways to improve the company’s operations on a standalone basis as well as looking at potential strategic alternatives.

As part of that process, Evergy plans to launch a full sales process in June, Bloomberg said citing confidential sources. The company and its advisers plan to reach out to several potential buyers to gauge their interest, including NextEra Energy Inc., WEC Energy Group Inc., CMS Energy Corp., Ameren Corp. and American Electric Power Co., Bloomberg reported.

The process is in its early stages and there is no guarantee any of the parties would pursue a deal or that the process will result in a sale of the company, Bloomberg wrote.

The company’s goal is to have proposals in place before the July 30 deadline set for the results of the review to be reported to the board, the people said. Evergy has said it plans to update the market in August on how it will proceed.

Bloomberg said representatives for NextEra, WEC, CMS Energy, Ameren and AEP said they don’t comment on market rumors or speculation.

I contacted Gina Penzig of Evergy about a potential sale of the company and she said "We don’t comment on speculation in the marketplace." 

In early April, Reorg M&A reported that NextEra Energy (NEE) is working with advisers to consider an offer for Evergy.

NextEra Energy, based in Houston, operates several wind farms in Kansas. Evergy purchases power from multiple wind farms that are owned by NextEra, said Gina Penzig, spokeswoman for Evergy in early April.

Evergy is already changing its strategy because of pressure from Elliott Management. Evergy has increased its five-year capital investment plan to $7.6 billion through 2024 compared to $6.1 billion in its prior plan. Evergy plans to spend $1.5 billion per year for five years in projects that modernize the electric grid, improve reliability while reducing operations and maintenance expense.

With the increased capital investment, Evergy has elected to halt the remainder of its share repurchase program.

Evergy was formed in 2018 with the combination of KCP&L and Westar Energy. The company has 1.6 million customers in Kansas and Missouri.

In 2019, Evergy earned $670 million or $2.79 per share compared with $536 million or $2.50 per share for 2018.

Evergy has been cutting staff through attrition and not replacing them when they retire or leave in order to reduce operating expenses.

One of the first things that Elliott wanted after acquiring shares of Evergy was to put the company up for sale, according to comments made by Evergy leadership. The problem with this is Evergy just went through a merger between KCP&L and Westar Energy. That merger took years of work and hundreds of hours of testimony and documents before the Kansas Corporation Commission. Initially, the KCC rejected the sale because the deal required too much debt. The two companies changed the deal to a stock for stock merger. Then the KCC approved the deal.

Sometimes a utility merger is not always a good idea. St. Joseph Light & Power merged in 2000-01 with Aquila of Kansas City, Mo., and the shareholders with St. Joseph Light & Power did not do so well after the merger because shares in Aquila fell after the merger. St. Joseph Light & Power shareholders who sold ahead of the merger did OK, but the shareholders who took the new stock did not.

Thoughtful Investor Editor Michael Hooper owns shares in Evergy.