ALLETE to Acquire U.S. Water Services, Inc., an Integrated Water Management Company
January 27 2015 - 8:00AM
Business Wire
ALLETE, Inc. (NYSE:ALE) today announced that it has signed a
definitive agreement to purchase U.S. Water Services, Inc., an
integrated industrial water management company. ALLETE will
initially purchase 87 percent of U.S. Water for $168 million, based
on a total implied enterprise value of $194 million. Current
employees and management of U.S. Water will continue to own the
remaining 13 percent. ALLETE will purchase the remaining 13 percent
interest in the future for a contingent amount based on U.S.
Water’s future earnings. The transaction is expected to close upon
satisfaction of customary closing conditions, including compliance
with Hart-Scott-Rodino antitrust clearing requirements.
Headquartered in St. Michael, Minn., U.S. Water has a national
footprint and serves a growing and diverse mix of over 3,600
industrial customers, including a significant number of Fortune 500
companies. U.S. Water provides integrated water management for
industry, combining chemical, equipment, engineering and service
for customized solutions to reduce water and energy usage and
improve efficiency.
U.S. Water helps customers achieve efficient and sustainable use
of their energy systems, is a leading provider to the biofuels
industry, and has a growing presence in the power generation and
midstream oil and gas industries.
“Water and energy are intricately linked, and attention to that
nexus is increasing,” said Al Hodnik, chairman, president and CEO
of ALLETE. “Just as with energy, regulation and social expectations
will increasingly drive water conservation, especially as water
scarcity becomes a growing challenge. We believe the demand for
sustainable water management solutions will increase over time as
large users seek ways to enhance efficiency and improve their
bottom line.”
The acquisition of U.S. Water is consistent with ALLETE’s stated
strategy of investing in energy infrastructure and related services
to complement its core regulated utility, balance exposure to
business cycles and changing demand, and provide long-term earnings
growth. Hodnik said that with this acquisition, ALLETE will now
focus its infrastructure and related service efforts on growing
ALLETE Clean Energy and U.S. Water.
“U.S. Water is an attractive size for ALLETE, has demonstrated
consistent growth, and will provide supportive cash flows with
minimal capital requirements,” Hodnik said. “It’s important to us
that U.S. Water’s integrated approach to finding customized
solutions for its customers has resulted in exceptional customer
retention that exceeds 90 percent and produces consistent recurring
revenues.”
“We are excited about joining the ALLETE team, and believe U.S.
Water will be a great fit,” said Allan Bly, U.S. Water Founder and
CEO. “This combination will provide a platform for long-term
success and growth for our company and employees.” U.S. Water’s
management team is expected to remain in place, as will the
company’s St. Michael, Minn. headquarters.
U.S. Water generated revenue of approximately $120 million
during 2014, and ALLETE projects future revenue growth of 10
percent to 15 percent annually. ALLETE expects the acquisition to
provide long-term earnings growth and diversity, and have no
material impact on 2015 earnings per share. ALLETE’s previously
stated 2015 earnings guidance is unchanged, and excludes
transaction costs. The transaction will be financed with a
combination of cash, equity raised from existing programs and
temporary short-term debt.
“We are focused on providing sustainable solutions to our
customers,” said Hodnik, “and our EnergyForward and Power of One
initiatives at Minnesota Power, renewable energy investments at
ALLETE Clean Energy, and investment in U.S. Water are great
examples.”
ALLETE remains predominantly a regulated utility through
Minnesota Power, Superior Water, Light & Power and an
investment in the American Transmission Company. Minnesota Power is
well positioned for the future as it executes on its EnergyForward
initiative and serves a potentially growing industrial customer
base. ATC is poised for future growth both organically and through
its partnership with Duke Energy. ALLETE’s infrastructure and
related services businesses include ALLETE Clean Energy, BNI, and
U.S. Water Services. ALLETE Clean Energy has a growing portfolio of
wind generating facilities, and U.S. Water provides integrated
water management to a growing base of industrial and commercial
customers. ALLETE is committed to earning a financial return that
rewards its shareholders, allows for reinvestment in its business
and sustains growth. The company has a long-term objective of
achieving minimum average earnings growth of 5 percent annually and
maintaining a competitive dividend payout.
Financial advisory services for this transaction were provided
by Piper Jaffray and J. P. Morgan. More information about U.S.
Water Services, Inc. can be found at its website:
www.uswaterservices.com. ALLETE’s corporate website is
www.allete.com.
ALLETE is an energy company headquartered in Duluth, Minn. In
addition to its electric utilities, Minnesota Power and Superior
Water, Light and Power of Wisconsin, ALLETE owns ALLETE Clean
Energy, based in Duluth, BNI Coal in Center, N.D., and has an eight
percent equity interest in the American Transmission Co. More
information about ALLETE is available at www.allete.com.
The statements contained in this release and statements that
ALLETE may make orally in connection with this release that are not
historical facts, are forward-looking statements. Actual results
may differ materially from those projected in the forward-looking
statements. These forward-looking statements involve risks and
uncertainties and investors are directed to the risks discussed in
documents filed by ALLETE with the Securities and Exchange
Commission.
ALLETE's press releases and other communications may include
certain non-Generally Accepted Accounting Principles (GAAP)
financial measures. A non-GAAP financial measure is defined as a
numerical measure of a company's financial performance, financial
position or cash flows that excludes (or includes) amounts that are
included in (or excluded from) the most directly comparable measure
calculated and presented in accordance with GAAP in the company's
financial statements.
Non-GAAP financial measures utilized by the Company include
presentations of earnings (loss) per share. ALLETE's management
believes that these non-GAAP financial measures provide useful
information to investors by removing the effect of variances in
GAAP reported results of operations that are not indicative of
changes in the fundamental earnings power of the Company's
operations. Management believes that the presentation of the
non-GAAP financial measures is appropriate and enables investors
and analysts to more accurately compare the company's ongoing
financial performance over the periods presented.
ALLETE, Inc.Investor Contact:Tim Thorp,
218-723-3953tthorp@allete.comorMedia Contact:Amy Rutledge,
218-723-7400arutledge@allete.com
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