Candian investment firm to pay $4.7 billion for Cleco; Olagues expected to be CEO

Cleco Corporation (NYSE: CNL), a public utility holding company and owner of regulated electric utility Cleco Power LLC on Monday announced that it has entered into a definitive agreement to be acquired by a group of North American long-term infrastructure investors led by Macquarie Infrastructure and Real Assets (MIRA) and British Columbia Investment Management Corporation (bcIMC), together with John Hancock Financial and other infrastructure investors (collectively, “investor group”). The agreement values Cleco at approximately $4.7 billion, including approximately $1.3 billion of assumed debt.
Under the terms of the agreement, the new owners will acquire all outstanding shares of Cleco Corporation for $55.37 per share in cash. The price represents approximately a 15 percent premium to Cleco’s closing price of $48.27 on October 17, 2014, the last trading day prior to the announcement of the agreement. The transaction is subject to customary closing conditions, including the approval of Cleco shareholders, the approval of the Louisiana Public Service Commission (LPSC) and the Federal Energy Regulatory Commission (FERC), and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. The transaction is expected to close in the second half of 2015.
Following the close of the transaction, Cleco Power LLC will continue to be regulated by the LPSC and FERC. The transaction will not affect residential or commercial rates for electricity.
In addition, following the close of the transaction, Cleco will continue to operate as an independent company led by local management and will maintain its headquarters in Pineville, La. Cleco’s chief executive officer, senior utility management, and leaders of corporate support functions will all be Louisiana residents as will at least four members of Cleco’s board of directors, including its chair. Cleco and the new owners have made additional commitments to the LPSC including that no changes will be made to Cleco’s operations, staffing levels (currently approximately 1,200 employees), compensation levels or employee and retiree benefits programs as a result of the transaction.
“With this agreement, Cleco’s existing investors will receive an exceptional value for their shares to top off a superior total shareholder return of the past few years, and our customers and employees can expect us to retain our strong commitment to service and reliability,” said Bruce Williamson, Cleco’s chairman, president and chief executive officer. “The board and management worked together in structuring this transaction to deliver a premium valuation to our public shareholders and ensure a continued local presence in the communities Cleco serves. This agreement is the right transaction for our shareholders, employees, retirees, and customers of all types. The new owners understand the value Cleco brings to the region and are committed to Cleco’s strategy as a safe, reliable electricity provider positioned to meet Louisiana’s long-term power needs.”
“A well-run utility like Cleco, operating in an environment in which our experience and expertise can help drive additional growth, represents a very good opportunity for our investors,” said Chris Leslie, chief executive officer of Macquarie Infrastructure Partners III (MIP III), the MIRA-managed fund leading the acquisition. “Our ownership group has significant experience with large utilities in the United States and around the world. We value having quality local management, and we support these independent businesses in their efforts to grow and prosper over the long-term.”
"Cleco is an attractive infrastructure business operating in a stable, regulated environment,” said Lincoln Webb, senior vice president, Infrastructure for bcIMC. “We are delighted to invest in Cleco — a strong and respected company based and doing business in the State of Louisiana. Cleco complements our existing infrastructure portfolio and is considered a long-term investment for bcIMC and our pension plan and insurance fund clients."
"Utility investing is a core part of our investment strategy. We serve as a strategic funding partner for utility and infrastructure build-out throughout North America, and we are very pleased to be a part of this investor group," added RecepKendircioglu, managing director, Power & Project Finance Team for John Hancock Life Insurance Company.
Upon closing, Darren Olagues, currently president of Cleco’s utility operating company, Cleco Power LLC, is expected to become president and chief executive officer of Cleco. Olagues has worked with Cleco for more than seven years and has over 20 years of utility industry experience. He was chief financial officer of Cleco Corporation and senior vice president of Cleco Midstream Resources prior to assuming his current position in 2013. A Louisiana native, Olagues will continue to be based out of the company’s headquarters in Pineville.
“Cleco has proudly served residents and businesses in Louisiana for nearly 80 years, and our commitment to them is as strong as ever,” said Olagues. “By partnering with this group of experienced, long-term infrastructure owners, Cleco will continue to operate as an independent, locally based company with a clear focus on preserving our strong culture. Our customers will continue to receive the reliable power and responsive service they have come to expect from us.”
Cleco’s existing customer service office locations and service centers will continue to provide customers with prompt responses to billing, installation, and service matters. Cleco expects the ownership transition from a public to private company to be completely seamless from the point of view of its customers. The company will continue to operate under the “Cleco” brand and name.
The company will continue to invest corporate resources and employee volunteer hours to help strengthen its communities. As a part of its public service effort, Cleco will also form a charitable foundation that supports community-based programs.
Under the terms of the definitive merger agreement, a newly formed entity will acquire all of the outstanding shares of Cleco Corporation for $55.37 per share in cash, or approximately $3.4 billion, and will also assume approximately $1.3 billion of debt outstanding. The new owners will refinance Cleco’s existing bank debt at closing.
Prior to closing, the transaction is expected to have no impact on Cleco’s dividend. Cleco shareholders will continue to receive dividends at an annualized rate of $1.60 per share until closing.
Goldman Sachs & Co. and Tudor, Pickering, Holt & Co. are serving as financial advisors to Cleco, and Locke Lord LLP is the company’s legal advisor. Hunton & Williams LLP is serving as legal counsel to the independent members of the Cleco board of directors.
Macquarie Capital (USA) Inc. is serving as financial advisor to the MIRA and bcIMC-led investor group. Kirkland & Ellis LLP is serving as its legal counsel. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel to bcIMC.
Headquartered in New York, Macquarie Infrastructure Partners III is a $3.0 billion private investment fund managed by MIRA, focused on making investments in infrastructure businesses in the United States and Canada. The majority of the investors in MIP III are U.S. and Canadian institutions including public and corporate pension funds, endowments, and foundations. Macquarie Infrastructure and Real Assets, a division of Macquarie Group Ltd. of Australia and the manager of MIP III, is the world’s largest infrastructure asset manager and an investor in real estate, agriculture, and energy assets. MIRA managed 29 infrastructure investment vehicles and $105 billion of infrastructure assets across 27 countries at March 30, 2014. MIRA, through MIP III and its predecessor funds, has invested more than $6.0 billion in the acquisition of North American infrastructure businesses including utilities Puget Energy, Aquarion Water, and Duquesne Light, as well as port terminals, toll roads, telecommunications towers, and waste collection and disposal businesses and an additional $7.0 billion in post-acquisition capital projects.