Westar Energy Stock Declines 5% On New Merger Deal

Stock in Westar Energy (WR) fell -5% today after disclosing a new deal to merge with Great Plains Energy (GXP).
Boards of directors for both companies approved a new merger deal that creates a holding company to be owned by Westar at 52.5% share and Great Plains at 47.5% share.
Stock in Westar fell because some shareholders are disappointed they aren't receiving a premium for their stock in the deal. A previous deal, rejected by the Kansas Corporation Commission, required Great Plains to pay $60 per share for Westar in a combination of cash and stock. The new deal includes no premium. In mid-morning trading, stock in Westar fell to $50.36 per share, down $2.80 per share.
A joint statement by the two companies says, "Under the terms of the agreement, Westar Energy shareholders will exchange each share of Westar Energy common stock for a share in the new holding company. Great Plains Energy shareholders will receive .5981 shares of common stock in the new holding company for each Great Plains Energy share. The transaction has a total equity value of approximately $14 billion. It is structured to permit a tax-free exchange of shares. No transaction debt will be incurred. The exchange ratio reflects the agreed-upon ownership split between the two companies. Following completion of the merger, Westar Energy shareholders will own approximately 52.5 percent and Great Plains Energy shareholders will own approximately 47.5 percent of the combined company. The agreement provides that, upon closing, the new holding company expects to set its initial common dividend at a level which maintains the current dividend for Great Plains Energy shareholders. This will result in approximately a 15 percent dividend increase for Westar Energy shareholders."
The companies also said, "The new, combined company will provide electric utility service to approximately one million Kansas customers and nearly 600,000 customers in Missouri. The combined company will have a new name, yet to be established. “The logic of combining these two companies is compelling. We are confident we have addressed the regulatory concerns with our originally-proposed transaction. We appreciate the Commission welcoming a different way to combine these two companies, preserving the unique value available only through this particular business combination,” said Mark Ruelle, president and chief executive officer of Westar Energy. “This merger creates a stronger company for our customers and a much more valuable company for shareholders, with no additional acquisition debt, along with sustaining commitments to Topeka and Kansas. It is a win-win. For our shareholders, it means a large increase in their dividend. We also expect significant earnings accretion and a larger and stronger earnings growth platform than we could achieve on our own. The company and its utilities will continue to have strong investment grade credit ratings.” 
Westar Energy and Great Plains Energy will merge to form a new holding company, which will operate regulated electric utilities in Kansas and Missouri. Operating headquarters will be in both Topeka, Kansas, and Kansas City, Missouri. Corporate headquarters will be in Kansas City, Missouri. “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,” said Terry Bassham, chairman, president and chief executive officer of Great Plains Energy. 
Upon closing, Ruelle will become the non-executive chairman of the new company board. Bassham will serve as president and chief executive officer of the new company and will also serve as a member of the board of directors. Senior management roles will be shared by executives from both companies. Among these are: Westar’s current senior vice president and chief financial officer (CFO), Tony Somma, will become executive vice president and CFO. Kevin Bryant, current Great Plains Energy senior vice president of finance and strategy and CFO will become executive vice president and chief operating officer. Greg Greenwood, Westar’s senior vice president of strategy, including regulatory affairs, will become the new company’s executive vice president of strategy and chief administrative officer, responsible for regulatory affairs and merger savings, among other responsibilities.