Mr. Curt Morgan of Vistra reports
VISTRA ENERGY AND CRIUS ENERGY TRUST AGREE TO AMEND PURCHASE AGREEMENT TO REFLECT AN IMPROVED PURCHASE PRICE FOR VISTRA'S PENDING ACQUISITION OF CRIUS ENERGY'S ATTRACTIVE RETAIL ELECTRICITY AND GAS PORTFOLIO
Vistra Energy and Crius Energy Trust have entered into an amendment to their existing purchase agreement pursuant to which Vistra has agreed to increase its acquisition price for Crius Energy such that unitholders of Crius Energy will now receive $8.80 per trust unit, an increase of $1.23 per trust unit from the parties' prior agreement. The purchase price is in addition to Crius Energy's previously declared 20.9-cent-per-unit distribution for the first quarter of 2019.
Vistra and Crius Energy negotiated the amendment in response to the receipt by the Crius Energy board of directors of an unsolicited acquisition proposal from a third party bidder dated Feb. 14, 2019, that was higher than the purchase price previously agreed by Vistra and Crius Energy. Vistra's management and board of directors carefully reviewed the terms of the third party acquisition proposal and determined that the Crius Energy transaction remained attractive and accretive at the new price of $8.80 per trust unit, or approximately $378-million (U.S.) plus the assumption of Crius Energy net debt of approximately $108-million (U.S.).
Curt Morgan, Vistra's president and chief executive officer, stated: "Vistra's decision to increase the purchase price for the Crius Energy portfolio came after a careful evaluation of the economics of the transaction. At a purchase price of approximately four times EV/EBITDA, this transaction is still projected to be EBITDA and free cash flow accretive and to exceed Vistra's investment threshold of 500 to 600 basis points above our cost of capital, while not interfering with Vistra's previously announced capital allocation and deleveraging plans."
Mr. Morgan added: "Since we first announced the transaction with Crius Energy on Feb. 7, our teams have had the opportunity to continue diligence work, which has only reinforced Vistra's confidence in the strategic and cultural fit of the two organizations, as well as our ability to achieve the synergy targets we previously announced. As a result, the Vistra management team and board of directors agreed it would be in the best interest of Vistra and its shareholders to pursue the Crius Energy transaction at a higher price, enabling Vistra to acquire this attractive platform while still remaining disciplined on the overall deal economics."
Brian Burden, chairman of Crius Energy's board of directors, commented: "After receiving an unsolicited third party acquisition proposal reflecting a higher per-unit purchase price for Crius Energy, the Crius Energy management team and board of directors advised Vistra of the proposal, which led to subsequent discussions. Following these discussions, our board unanimously approved the amendment to the purchase agreement, which reflects an increase in proceeds to Crius Energy unitholders of more than $1 per unit, which is higher than the unsolicited third party acquisition proposal received by the board. At an approximately 60-per-cent premium to Crius Energy's unit price as of market close on Feb. 6, 2019, we believe the proposed transaction with Vistra, as amended, is in the best interest of the Crius Energy unitholders, customers and employees, and Crius Energy's independent directors and board unanimously support the transaction."
Strategic acquisition accelerating Vistra's Midwest and Northeast growth strategy via Crius Energy's presence in 19 states and the District of Columbia, selling both electricity and natural gas products primarily to high-value residential and small business customers;
High degree of overlap with Vistra's generation fleet; approximately 11.6 terawatt-hours of load acquired, improving Vistra's match of its generation to load profile to approximately 45 per cent;
Establishes a platform for future growth, leveraging Vistra's existing retail marketing capabilities and Crius Energy's experienced team;
Enhances integrated value proposition through collateral and transaction efficiencies, particularly via Crius Energy's largely residential portfolio consistent with Vistra's industry-leading retail capabilities;
Complements Vistra's municipal aggregation and large commercial and industrial portfolio acquired from Dynegy in April, 2018, and part of a broader organic expansion effort;
Acquisition economics exceed Vistra's investment threshold of mid-to-high-teen unlevered returns; achieved only through the expertise and scale of the Vistra retail business and ownership of complementary generation assets;
Attractive premium of approximately 60 per cent above Crius Energy's Feb. 6, 2019, closing price to be received by Crius Energy unitholders under the proposed transaction;
Tuck-in acquisition with no anticipated changes to Vistra's capital allocation or deleveraging plans;
Continued focus on the customer approach enhancing Vistra's stable earnings and cash flow in a risk-reducing manner;
Unanimous recommendation of Crius Energy's independent directors in favour of the transaction, with voting and support agreements representing approximately 17 per cent of Crius Energy's units executed in support of the transaction.
Transaction and approvals
The definitive agreement (as amended) includes customary deal protections, including non-solicitation covenants, the right of Vistra to match any competing proposals and the payment of a termination fee to Vistra under certain circumstances. In the amendment, in consideration for the increased purchase price, the parties agreed to increase the termination fee payable to Vistra under the agreement to $25.1-million from $10.4-million, together with a corresponding increase in the reverse termination fee payable to Crius Energy under the agreement.
In addition to the $8.80 per trust unit to be received by Crius Energy unitholders under the proposed transaction, Crius Energy unitholders will also continue to be entitled to receive Crius Energy's 20.9-cent-per-unit distribution for the first quarter of 2019 previously declared on Jan. 16, 2019, resulting in total consideration in the amount of $9.009 per unit. The declared distribution was amended on Feb. 15, 2019, such that (a) the distribution record date will be March 26, 2019, and (b) the distribution payment date will be the earlier of June 17, 2019, and the closing date of the transaction. Under the definitive agreement, Crius Energy has agreed not to declare any further distributions prior to the closing.
The proposed transaction is subject to the approval of at least two-thirds of Crius Energy's unitholders voting at the special unitholder meeting scheduled for March 28, 2019. Unitholders of Crius Energy representing approximately 17 per cent of the units, including all of the directors and senior officers of Crius Energy, previously entered into voting and support agreements with Vistra in support of the transaction (including as amended).
In addition to satisfying the closing conditions and consents customary for a transaction of this nature, the transaction is also subject to applicable regulatory approvals, including the expiration or termination of any applicable waiting period under the United States Hart-Scott-Rodino Antitrust (HSR) Improvements Act, and approval by the Federal Energy Regulatory Commission (FERC). Vistra and Crius Energy made the HSR and FERC filings on Feb. 19, 2019.
Pending the receipt of all necessary approvals and the fulfilment of all other customary closing conditions, the parties expect the transaction to close in the second quarter of 2019.
Vistra has posted a presentation with additional details of the transaction on the investor relations section of its website.
Crius Energy will include the full details of the transaction in a management information circular describing the matters that will be considered at the special meeting of Crius Energy's unitholders, which is expected to be mailed in early March, 2019. A copy of the definitive agreement has been, and a copy of the amendment will be, made available on SEDAR under Crius Energy's issuer profile.
Crius Energy board recommendation
Crius Energy's board of directors, on the unanimous recommendation of its independent directors, has approved the transaction and the related amendment, and will recommend that Crius Energy's unitholders vote in favour of the transaction. The board received a fairness opinion from Guggenheim Securities LLC determining that, based upon and subject to the assumptions, limitations and qualifications stated in the opinion, the revised per-unit consideration to be received by Crius Energy's unitholders under the transaction is fair, from a financial point of view, to the unitholders.
A copy of the fairness opinion, which should be read carefully and in its entirety, and other relevant background information, will be included in the management information circular that will be mailed to Crius Energy's unitholders in connection with the special meeting.
Guggenheim Securities LLC is serving as financial adviser to Crius Energy and Bennett Jones LLP and Baker Botts LLP are serving as legal advisers to Crius Energy.
RBC Capital Markets is serving as financial adviser to Vistra and Latham & Watkins LLP is serving as legal adviser to Vistra.
About Vistra Energy
Vistra Energy is a premier, integrated power company based in Irving, Tex., combining an innovative, customer-centric approach to retail with a focus on safe, reliable and efficient power generation. Through its retail and generation businesses which include TXU Energy, Homefield Energy, Dynegy and Luminant, Vistra operates in 12 states and six of the seven competitive markets in the U.S., with about 5,400 employees. Vistra's retail brands serve approximately 2.9 million residential, commercial and industrial customers across five top retail states, and its generation fleet totals approximately 41,000 megawatts of highly efficient generation capacity, with a diverse portfolio of natural gas, nuclear, coal, solar and battery storage facilities. The company is currently developing the largest battery energy storage system of its kind in the world -- a 300-megawatt/1,200-megawatt-hour system in Moss Landing, Calif.
About Crius Energy Trust
With approximately one million residential customer equivalents, Crius Energy provides competitive electricity and natural gas products to residential and commercial customers in 19 states and the District of Columbia in the United States. The company sells energy products through a family of brands strategy utilizing a multichannel sales approach including exclusive partnerships, direct-to-consumer channels and broker marketing channels. Crius Energy offers consumers a broad suite of energy products and services including fixed and variable contracts, renewable energy and bundled products to support their energy needs beyond what is offered by their local utility.
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