Montana is not scheduled to start deliberations on the approval until May 4th and then it could still be some time after that for the decision. I think that is why the stock price has drifted down lately. Some people think that is too long to wait considering that there were objections. I think it will get approved with several conditions attached. Appreciate any comments or information. Honcho
from thedeal.com 4/10/07 The spread on the $1.3 billion buyout of utility NorthWestern Corp. by Babcock & Brown Infrastructure Ltd. is at its widest since the beginning of the year, as the deal makes its way through the final round of regulatory and political scrutiny.
Babcock, a utility investment company based in Sydney, Australia, has an April 25, 2006, deal to acquire NorthWestern for $37 per share in cash. Sioux Falls, S.D.-based NorthWestern is the holding company for NorthWestern Energy, which provides electricity and natural gas in Montana, South Dakota and Nebraska.
NorthWestern shareholders, the Federal Energy Regulatory Commission and Nebraska regulators have already approved the transaction.
The Montana Public Service Commission held public hearings on the deal in March. Responses are due from applicants in early May. The five member MPSC could hold working sessions on the transaction through May, but a final decision on the deal is not likely before June at the earliest.
The deal spread Tuesday, April 10, ticked out to about $1.96, or 5.6%. Assuming a June 30 close, that represented an annualized return of about 25%.
One reason for the wider spread seems to be a recent bill presented in the Montana state Senate. The measure, SB 558, proposed to establish an authority that could acquire and operate utility assets in Montana for the public. The bill was voted down April 3 in a 25-to-25 tie. It appears that the measure, which would have allowed the authority some leeway to raise utility rates under limited oversight by the MPSC, has little chance of revival during the current legislative session.
As such, the fate of the Northwestern deal hinges on the MPSC.
But the fact that the Senate bill was presented and received considerable support is a reminder that the sale of recently bankrupt Northwestern has been a political football from the start.
In June 2005, Montana Public Power Inc., a consortium of municipalities, offered to acquire NorthWestern for $32.50 per share in cash. That offer, which had the support of Harbert Distressed Investment Master Fund Ltd., which then owned 20% of NorthWestern, would have been fully executed with debt and was deemed too risky by NorthWestern. The MPPI proposal enjoyed some political support in Montana.
Black Hills Corp., a largely unregulated energy company, then offered $33 per share in stock but was also rebuffed. Northwestern then held an auction that ended with the Babcock deal.
Harbert has since sold down its stake.
The Senate bill is dead and it is unclear what support it would have received in the Montana house, but it appears the buyers did not see it coming, a source said. Since the proposal made no sense unless there was a reasonable chance that the Babcock deal was not going to get MPSC approval as structured, its appearance is interesting, he said.
Since two utility mergers last year were scuttled because of political problems, including FPL Group Inc.'s bid for Constellation Energy Group Inc. in Maryland, the Northwestern situation could be considered touchy, an arb said. It seems the commission is now split on the approval, he said.
As long as Babock has its equity financing in place, the MPSC should look favorably on the deal, another arb said.
The Babcock deal contemplates using cash on hand and raising equity from institutional investors. That funding is apparently still under way.
The failed Senate bill apparently intended to give the would-be authority rate leeway to gain investment grade debt ratings.
The Commission is going to consider two submissions by Montana Consumer Council this morning. MCC is the group that wants to scuttle the deal and buy NWEC itself. The Commission is supposed to make a decision on admitting or denying the submissions today.