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El Paso Electric considered 6 suitors before settling on merger partnerfrom SNL Power Daily with Market Report El Paso Electric considered 6 suitors before settling on merger partner BYLINE: Usman Khalid El Paso Electric Co. was first contacted by another company about a potential acquisition in April 2017, more than two years before the public announcement of its planned takeover by an investment vehicle advised by J.P. Morgan Investment Management Inc., according to a July 16 proxy filing. The investment vehicle, a subsidiary of Sun Jupiter Holdings LLC, an affiliate of Infrastructure Investment Funds, or IIF, plans to acquire El Paso Electric for $68.25 per share in cash. The deal was announced June 3. Shareholders were recommended to vote in favor of the offer. El Paso's board and senior management began considering an acquisition when in April 2017 an unnamed buyer offered to purchase the company at $58.00 to $64.00 per share, according to a proxy filing. However, the deal did not pan out as the potential buyer did not follow through with a more solid offer. Despite the company being on the rumor mill for the better part of 2018, El Paso Electric President and CEO Mary Kipp publicly denied any potential transactions. However, during the same period, El Paso and its advisers, Lazard and Baker Botts LLP, sought different types of transactions that could attract potential buyers, including strategic transactions with technology companies. In December 2018, Lazard contacted six companies about a potential transaction: two utilities, IIF, and three other infrastructure- and utility-oriented investor funds. Initial offers ranged from $57 per share to $66 per share, mostly all cash. Negotiations later continued with IIF and two other bidders and later narrowed to IIF and one other. In further discussions over the next few weeks, IIF agreed to increase its bid from $67.00 per share to $68.25 per share in cash plus two years of protection with respect to salaries and benefits, a rate credit to the company's Texas and New Mexico customers totaling $21 million over 36 months, and a commitment to contribute $5 million annually for 20 years to an economic/community-development fund to benefit communities in the company's service territory, including the city of El Paso. Additionally, IIF pledged to keep the utility's headquarters in El Paso. The merger agreement includes termination fees of $85 million payable by El Paso Electric and of $170 million payable by IIF, both with conditions. On June 25, Kipp notified the El Paso Electric board of her intent to resign. On July 1, it was announced that she would become president of Puget Sound Energy Inc. in Washington. According to the proxy statement, Kipp was approached by a recruiter in November 2018 and interviewed with Puget this spring. She accepted the Puget offer after the El Paso acquisition was announced. In a July 18 article in the El Paso Times, Kipp said she took the Puget position because it would be easier for her and her teenage son to travel from the Seattle area to visit family members in San Francisco. According to the article, she will lose several million dollars in stock awards and other compensation that would have been granted if the El Paso acquisition is completed. |
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