Fortis Calls Gaz Metro Bid For CVPS "Hostile"
06/29/11 7:34AM By Nina Keck
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(Host) Bidding wars may be common in the corporate world.
But industry observers say the drama that's unfolding around the possible sale of Central Vermont Public Service is unusual among regulated utilities.
VPR's Nina Keck has more.
(Keck) Fortis, one of Canada's largest utilities, announced it was buying Vermont's largest utility last month.
But that deal was thrown into question when Gaz Metro, the parent company of Green Mountain Power, made a competing bid last week to buy CVPS.
Barry Perry, chief financial officer at Fortis, says CVPS may describe the offer by Gaz Metro as "unsolicited." But he has another description.
(Perry) "It is a hostile bid. In the utility sector, hostile bids are not normal. They're rare, in fact. So, usually you end up negotiating a transaction, the board selects a party and that's the end of it. The party is then required to get it approved by the regulator and the shareholders of the company. In this case GMP did decide to go hostile. It is a little unusual."(Keck) CVPS says its board of directors has authorized discussions with Gaz Metro regarding their offer. While CVPS would not say how long those deliberations will take, a decision is expected within days.
Barry Perry says if the Fortis deal doesn't go through, CVPS could be legally bound to pay Fortis $19.5 million in penalties.
Michael Dworkin directs the institute for Energy and the Environment at the Vermont Law School. He agrees that the bidding war over CVPS is unusual. But he says it will be even more interesting to see how Fortis will respond.
(Dworkin) "I do think there are some grounds for curiosity because the Fortis bid as it was presented was a relatively off-the-shelf-bid."
(Keck) In other words, Dworkin says, Fortis offered a premium for stock price, would take care of outstanding debt and set aside $21 million to benefit ratepayers. That's pretty standard stuff, according to Dworkin.
(Dworkin) "The Green Mountain Power bid is much more customized and much less an off-the-shelf bid. It's only slightly higher for the shareholder, but it's got a lot more of the general good of the state packed into it. So if I was Fortis I would be looking and wondering, ‘Are there things there they can meet or match? Why didn't they think of doing that ahead of time when they had their first negotiations?'"
(Keck) The Fortis chief financial officer wouldn't say if the company plans to make a counteroffer. He says Fortis first needs to hear from CVPS's board of directors.
For VPR News, I'm Nina Keck.