The Kansas Corporation Commission (KCC) on Oct. 11 approved – subject to certain conditions – the transaction under which Fortis (TSX:FTS) will acquire ITC Holdings (NYSE:ITC).
In an Oct. 11 statement, Fortis and ITC said that the KCC approval completes all required regulatory authorizations for the acquisition.
“We are pleased with the approval from the KCC, and look forward to continuing to serve the transmission needs of the State of Kansas,” Barry Perry, president and CEO of Fortis, said in the statement.
Joseph Welch, chairman, president and CEO of ITC, said in the statement, “We look forward to closing the transaction and finalizing matters related to company integration.”
According to the KCC’s Oct. 11 order, the transaction is valued at about $11.3bn, and is structured to preserve Fortis’ investment-grade credit rating.
“Fortis is paying US$22.57 in cash + 0.7520 of a Fortis common share for each ITC Holdings common share, which represents an approximate 33% premium compared to the US$33.75 ITC Holdings pre-bid unaffected stock price as of market close on November 27, 2015, immediately before ITC Holdings publicly announced it was undertaking a review of its strategic alternatives,” the KCC said.
As noted in the order, ITC Great Plains LLC, on behalf of itself and its parent company ITC Holdings, together with Fortis and its subsidiaries, including FortisUS, ITC Investment Holdings and Element Acquisition Sub Inc. (collectively, Fortis, ITC Great Plains and ITC Holdings, or the joint applicants), in May filed a joint application with the KCC requesting approval of Fortis’ acquisition of ITC Holdings.
KCC staff on Sept. 2 filed its report and recommendation (R&R), concluding that Fortis possesses the financial, managerial and technical experience to provide sufficient and efficient service in Kansas. The R&R presented conditions for approval of the transaction, which are set forth in the order, the KCC added.
“After explaining the transaction, subject to the merger conditions, satisfies the commission’s merger standards, the R&R indicates staff considers the joint applicants’ and Sunflower [Electric Power Corporation]/Mid-Kansas [Electric Company]’s acceptance of the merger conditions to be a prerequisite to approving the transaction,” the KCC said.
The joint applicants on Sept. 8 filed a response in support of staff’s recommendation to approve the transaction subject to the merger conditions. The KCC added that the joint applicants confirmed that they agree with the merger conditions and sought approval of the transaction subject to those conditions. Accordingly, staff recommends approval of the transaction subject to the merger conditions, the KCC said.
Based on its review of the evidence, the KCC said that it concludes that:
- After the transaction, ITC Great Plains will continue to possess the necessary financial, managerial and technical experience to provide sufficient and efficient service in Kansas
- Subject to the merger conditions, the transaction satisfies the merger standards
- Subject to the merger conditions, the transaction will promote the public interest
Under Fortis’ ownership, the ITC Operating Companies, including ITC Great Plains, will continue as stand-alone transmission-only companies, focusing on transmission investment and operations, the KCC said.
Fortis plans to retain the management of ITC Holdings and ITC Great Plains, and under “Merger Condition No. 4,” for instance, has committed to retain aggregate current employment levels at ITC Great Plains in Kansas for three years after the transaction closes, the KCC said.
Under “Merger Condition No. 5,” Fortis committed to maintain current aggregate levels of charitable contributions and community support in Kansas provided by ITC Great Plains and ITC Holdings for three years, and thereafter ITC Great Plains and ITC Holdings will have discretion on charitable contributions and community support programs in Kansas, the KCC said.
“Merger Condition No. 6” requires Fortis to maintain ITC Great Plains’ headquarters in Topeka, Kansas, for five years after the transaction closes, the KCC said, noting that for an additional five years thereafter, Fortis has committed to keeping ITC Great Plains’ headquarters in Kansas and to notify the KCC before relocating from Topeka.
The transaction includes a minority equity investor, Finn Investment Pte. Ltd., or another direct or indirect and wholly owned subsidiary of GIC (Ventures) Pte. Ltd., the KCC said.
ITC Great Plains will continue to be overseen by the ITC Board of Directors, which will consist of a majority of independent directors, the KCC said.
Discussing the effect of the proposed transaction on the existing competition, for instance, the KCC noted that Fortis currently has no operations in Kansas, the Southwest Power Pool (SPP), or Midcontinent ISO (MISO), and Fortis does not own any electric or natural gas transmission lines parallel to or competing with ITC Great Plains. Furthermore, the KCC said, SPP will continue to have functional control over the transmission assets of ITC Great Plains, which will continue to provide transmission service under the terms and conditions under SPP’s FERC-approved open access transmission tariff.
As reported, Fortis, ITC Holdings and GIC Private Limited on Sept. 26 said that FERC has authorized the acquisition of ITC by Fortis and a subsidiary of GIC.
The Missouri Public Service Commission (PSC), in an order that was issued on Sept. 14 and had an effective date of Sept. 24, approved a stipulation and agreement between Fortis, ITC Holdings, ITC Midwest and PSC staff involving the proposed merger of Fortis and ITC, and authorized the companies to complete the merger transactions.
Fortis and ITC, in a Sept. 15 statement, said that their shareholders approved the acquisition at shareholder meetings held on May 5 and June 22, respectively. Approval required from the Committee on Foreign Investment in the United States was received on July 8, the companies said, adding that approvals from the Oklahoma Corporation Commission and the Illinois Commerce Commission were received on Aug. 16 and Aug. 23, respectively.
According to the companies’ Sept. 26 statement, the PSC of Wisconsin voted on Sept. 22 to approve the acquisition, subject to conditions to be confirmed in an official PSC order to follow.
The companies also noted that all applicable consents related to the transfer of control of licenses were received from the Federal Communications Commission as of Sept. 21.