Saturday, December 07, 2019
Hawai'i Free Press

Current Articles | Archives

Monday, January 12, 2015
NextEra Merger Timeline: Interest in Hawaiian Electric Began in 2011 With Big Cable
By News Release @ 11:34 AM :: 2970 Views :: Energy

The following is from a Form S-4 Registration Statement flied January 8, 2015 by NextEra with the SEC. 

Excerpt starts on page 30:

The board of directors and management of NEE became more familiar with HEI through NEE’s involvement with energy projects in Hawaii in 2011, including potential solar and wind generation and undersea cable projects and, later, battery storage projects.

In May 2014, Mr. James L. Robo, Chairman and Chief Executive Officer of NEE, requested a meeting with Ms. Constance H. Lau, President and Chief Executive Officer of HEI. At their meeting, Mr. Robo and Ms. Lau discussed topics of mutual interest in the utility industry, and Mr. Robo expressed his view that a potential merger of HEI with NEE could allow NEE to apply its operational expertise and access to capital to HEI’s utility business with benefits for both NEE and HEI, including in connection with Hawaiian Electric’s clean energy growth plans.

Mr. Robo presented Ms. Lau with a preliminary, confidential written proposal valuing HEI in its entirety (including both Hawaiian Electric and American Savings Bank) at $30.00 per HEI share, with the merger consideration to consist of either cash or NEE common stock at HEI’s option. The preliminary proposal further stated that NEE understood that American Savings Bank could not be part of the transaction and that NEE had been developing plans to transfer the bank from under HEI’s control in connection with the closing of any potential NEE/HEI transaction. Ms. Lau advised that she would discuss NEE’s preliminary proposal with the HEI board at an upcoming meeting.

At the regularly scheduled HEI annual board retreat on June 16–18, 2014, Ms. Lau and other members of HEI’s management provided an overview of NEE’s preliminary proposal to the HEI board. Following discussion, management committed to provide a more detailed analysis to the HEI board in July. Over the course of the next several weeks, HEI’s management met with financial and legal advisors and reviewed and analyzed the terms of a potential transaction with NEE and clarified certain aspects of the preliminary proposal with NEE’s management.

On July 21, 2014, the HEI board met, together with management and representatives of J.P. Morgan and Skadden. At the meeting, the HEI board approved the engagement of J.P. Morgan as financial adviser and Skadden as legal counsel. Representatives of Skadden provided advice on certain legal matters. Representatives of J.P. Morgan provided the HEI board with an overview of NEE from a financial perspective, and HEI’s management provided additional analysis concerning HEI’s valuation and a more detailed analysis of NEE’s preliminary proposal, including additional clarifications obtained from NEE’s management. Representatives of J.P. Morgan also reviewed other potential strategic alternatives for HEI, including potential acquirers of HEI’s utility business or bank business, and considerations concerning HEI remaining a standalone company. The HEI board, together with HEI’s management and representatives of J.P. Morgan, discussed the benefits and risks of contacting third parties who might have an interest in engaging in a strategic transaction with HEI. Following discussion, the HEI board authorized HEI’s management to communicate to NEE that the amount of the proposed merger consideration was insufficient but that if NEE would be willing to consider increasing the proposed merger consideration, HEI would be willing to enter into a confidentiality agreement and allow the commencement of due diligence to support an increase in proposed merger consideration.

During late July 2014, HEI and NEE and their counsel negotiated the terms of a confidentiality and standstill agreement to facilitate discussion of a transaction and business due diligence between the parties. On August 2, 2014, HEI and NEE executed the confidentiality agreement. The parties exchanged initial requests and proposed schedules for documentary and management meeting due diligence.

During this period, HEI considered possible alternatives for the separation of American Savings Bank from HEI contingent upon an acquisition of HEI by NEE. Among the alternatives considered were a spin-off of American Savings Bank or ASB Hawaii to HEI’s shareholders and a potential sale of American Savings Bank for cash. HEI weighed strategic, logistical, regulatory, tax and other considerations in connection with the potential alternative strategies.

On August 8, 2014, the HEI board met, together with senior management, and discussed the progress in discussions with NEE. The HEI board and management also discussed proposed next steps in the negotiations with NEE, including the delivery of a high level term sheet of proposed transaction terms to NEE.

On August 11, 2014, Mr. James A. Ajello, Executive Vice President and Chief Financial Officer of HEI, delivered a letter to Mr. Moray Dewhurst, Vice Chairman and Chief Financial Officer of NEE, reiterating the need for NEE to increase the value of its proposal and attaching initial diligence information with respect to American Savings Bank and Hawaiian Electric and a term sheet with respect to certain high level terms of a possible transaction between NEE and HEI. The proposed terms addressed the separation of American Savings Bank, with HEI’s obligation to separate American Savings Bank to be conditioned on the successful completion of an NEE/HEI combination. The proposal specified that the operational headquarters of HEI’s utility business would remain in Honolulu, Hawaii and expressed the need for commitments by NEE relating to employee job protections in connection with the merger and the maintenance of HEI’s historic levels of community involvement and charitable contributions. Finally, HEI proposed a strong commitment to obtaining regulatory approvals for the proposed transaction and the payment by NEE of a termination fee if regulatory approvals were not obtained.

Following the letter, Mr. Ajello, Mr. Richardson, General Counsel of HEI, and Mr. Sieving, General Counsel of NEE, discussed the proposed terms of the potential transaction. Mr. Ajello noted the importance that the HEI board placed on the potential transaction and that HEI would devote significant resources to advance mutual due diligence. Mr. Ajello and Mr. Sieving also discussed the proposed schedule for mutual due diligence.

Throughout the remainder of August and during September and October, NEE and HEI conducted mutual due diligence with respect to each other’s businesses through exchange of documents and a series of management discussions, covering the potential regulatory, shareholder and other approvals, HEI’s utility business, legal and other regulatory matters, tax matters, employee benefit matters and other customary diligence topics. NEE also conducted diligence with respect to HEI’s banking business aimed at understanding whether there might be any significant obstacles to a separation of HEI and American Savings Bank. HEI expressed its views that a spin-off of American Savings Bank to HEI’s shareholders presented lower execution risk and would have greater certainty of completion from a regulatory perspective than a sale of American Savings Bank.

In late August 2014, Mr. Dewhurst delivered a letter to Mr. Ajello acknowledging HEI’s preference to separate American Savings Bank through a spin-off to HEI shareholders in connection with any transaction and proposing that NEE would pay HEI shareholders $24.50 for each share of HEI common stock, in cash or NEE stock at HEI’s election, with HEI’s bank business to be spun off to HEI’s shareholders immediately prior to completion of the NEE/HEI transaction. NEE also indicated that it would be willing to absorb up to $130 million of the corporate tax liability resulting from the spin-off of American Savings Bank. The letter also discussed NEE’s commitments regarding job protections and obtaining necessary regulatory approvals.

In late August 2014, Mr. Dewhurst and Mr. Ajello discussed by telephone the terms of NEE’s letter, with Mr. Ajello indicating that HEI would be seeking improved financial terms. In mid-September, Mr. Ajello advised Mr. Dewhurst that after internal discussions among HEI’s management and directors, and with the understanding that HEI continued to seek enhanced financial terms, HEI was prepared to move forward with discussions. During September 2014, discussions continued between the parties and their advisors regarding diligence matters and the financial, tax and legal aspects of a potential transaction. The discussions focused on a potential all-stock transaction in which the receipt by HEI shareholders of NEE common stock as merger consideration, as well as the receipt by HEI shareholders of stock of the bank or its holding company in a spin-off, was expected to be tax-free to those shareholders.

On September 5, 2014, the HEI board met, together with management and representatives of J.P. Morgan and Skadden. Mr. Ajello provided an update on the ongoing negotiations with NEE, and J.P. Morgan provided an updated valuation analysis based on NEE’s revised proposal. The HEI board, together with HEI’s management and representatives of J.P. Morgan and Skadden, also engaged in further discussion of the benefits and risks of contacting third parties who might have an interest in engaging in a strategic transaction with HEI. The HEI board concluded, in light of the proposed merger consideration and the regulatory approvals required to complete a transaction, that the likelihood of securing a superior proposal was low, from both a financial and a deal certainty perspective. At the same time, the HEI board concluded that the risk of leaks arising from a broader sale process was high and that any such leaks would likely have a negative effect on the potential transaction with NEE, as well as negative effects on HEI’s utility business and bank business, particularly in light of HEI’s unique circumstances in the Hawaii community and the regulated nature of its businesses. Following discussion of these and various other matters, including potential forms of consideration for any transaction with NEE, the HEI board authorized management to enter into further due diligence and negotiations with NEE to seek enhanced value and to negotiate the terms of a potential merger agreement with NEE. The HEI board also instructed management to analyze the required regulatory approvals for the merger and the plans for obtaining those approvals, as well as to evaluate further the impact of the transaction on HEI’s non-shareholder constituencies, including customers, employees and the State of Hawaii generally.

Following this board meeting, management of HEI and NEE continued to negotiate the terms of the proposed transaction. On September 11, 2014, NEE communicated a revised proposal to HEI, in which NEE would pay HEI shareholders $25.00 per share of HEI common stock and HEI’s bank business would be spun off to HEI’s shareholders. NEE further agreed that it would bear the full expected corporate tax liability resulting from the bank spin-off.

In late September 2014, representatives of HEI provided representatives of NEE with a draft merger agreement with respect to the proposed transaction. During late September and early October 2014, the parties negotiated the terms of the proposed merger agreement with the assistance of their respective counsels.

On October 16, 2014, the board of directors of NEE met near NEE’s Florida headquarters, together with representatives of Citigroup, NEE’s financial advisors with respect to the transaction, and a representative of Wachtell, NEE’s counsel with respect to the transaction. Mr. Robo and senior NEE management reviewed written materials previously provided to the directors, engaged in a detailed discussion regarding the proposed transaction with the directors and, together with their advisors, responded to questions from the directors. They also presented and discussed with the directors information about HEI and its Hawaii markets, the strategic and business rationale for a combination, the expected financial impact of the transaction on NEE, the various risks related to a transaction, NEE management’s view of the tenor and progress of the discussions with HEI and the potential terms and conditions of the transaction, including discussions regarding price. Following discussion, the NEE board of directors authorized NEE management to proceed with the proposed transaction at a valuation of up to $25.50 per HEI share.

On October 20, 2014, the board of directors of HEI met to discuss, among other matters, the terms of the proposed transaction with NEE, with Mr. Robo and other members of NEE’s senior management also in attendance for a portion of the meeting. Representatives of J.P. Morgan and Skadden were also present. Prior to the arrival of NEE’s representatives at the meeting, the HEI board engaged in a discussion with members of management and representatives of J.P. Morgan and Skadden regarding various aspects of the proposed transaction, including NEE’s dividend history and its future prospects, the scope of the fiduciary out provisions in the draft merger agreement and the low likelihood that outreach to other potential bidders would result in a superior proposal. During the portion of the meeting for which they were present, Mr. Robo and other members of NEE’s senior management presented an overview of NEE’s business to the HEI board. Mr. Robo also addressed NEE’s proposed approach to doing business in Hawaii, including NEE’s proposed commitment to developing Hawaii’s energy future, and to obtaining the requisite regulatory approvals for the proposed transaction. Following the departure of NEE representatives from the meeting, HEI’s management provided an update with respect to the trading of NEE and HEI common stock, and representatives of Skadden summarized the principal terms of the draft merger agreement. In this regard, it was noted that the merger agreement remained open as to whether the merger consideration to be received by HEI shareholders would be fixed at a specific dollar value or whether it would be fixed at a specific exchange ratio, and the HEI board discussed the relative merits of each approach. Following the discussion, J.P. Morgan provided a detailed overview of its utility valuation analysis.

On October 21, 2014, senior executives of HEI and NEE met together with their respective counsel from Skadden and Wachtell. The parties discussed several aspects of the proposed merger and of the draft merger agreement, including interim operating covenants, representations and warranties and the provisions governing seeking regulatory and shareholder approvals for the transaction and termination fees. Thereafter, Messrs. Robo and Dewhurst and Ms. Lau and Mr. Ajello discussed the parties’ strategy for successfully obtaining approval for the proposed transaction and the extent of NEE’s potential commitments to the HPUC in that regard.

On November 5, 2014, the HEI board met, together with senior management and representatives of J.P. Morgan, Skadden and HEI’s proxy solicitor. Management updated the HEI board regarding the status of negotiations with NEE, including NEE’s position that the transaction be undertaken on the basis of a fixed exchange ratio. Following discussion, a representative of HEI’s proxy solicitor provided the HEI board with an overview of HEI’s shareholder base and the proxy solicitation process that would be undertaken in the event an agreement were reached with NEE. In addition, representatives of J.P. Morgan provided the HEI board with a detailed update of its valuation analysis of HEI’s bank business.

Through mid-November, HEI and NEE continued to discuss the level and calculation of the proposed merger consideration. In addition, HEI proposed that it would pay a special cash dividend to HEI shareholders immediately prior to completion of the proposed merger. NEE agreed that HEI could pay such a special cash dividend in the amount of $0.25 per share without impacting the merger consideration. Following further discussion, HEI continued to seek an increase in the merger consideration and proposed increasing the special cash dividend to $0.50 per share. NEE indicated that the increased special cash dividend was acceptable to NEE. In the context of these discussions, HEI also acceded to NEE’s position that the merger consideration be determined by a fixed exchange ratio, while NEE agreed to HEI’s position that the fixed exchange ratio should be calculated based on the twenty day volume weighted average price of NEE common stock as of the day prior to the signing of the merger agreement.

The HEI board met on November 18, 2014, together with management and representatives of J.P. Morgan and Skadden. Following an update from management on the status of negotiations with NEE, the independent directors met in executive session with representatives of J.P. Morgan and Skadden, without HEI’s management being present.Representatives of J.P. Morgan updated the HEI board with respect to its valuation analyses of HEI’s utility and bank businesses. J.P. Morgan also described for the independent directors the process undertaken by management in negotiating the proposed transaction and the process undertaken by J.P. Morgan for purposes of rendering a fairness opinion. Following discussion, the independent directors engaged in a detailed discussion with representatives of J.P. Morgan and Skadden regarding how HEI’s shareholders and other constituencies would benefit from the terms of the proposed transaction with NEE. The independent directors also discussed again the advisability of contacting third parties who might be interested in a transaction with HEI, with the conclusion that there was a very low likelihood of there being any such interested parties or that such outreach would result in a superior proposal, and that, in any event, the draft merger agreement preserved the ability of the HEI board to consider superior offers in the event that any interested parties were to emerge following execution of the merger agreement. At the conclusion of the executive session, the HEI board engaged in further discussion of the proposed merger with management.

Through the end of November, HEI and NEE continued to negotiate the terms of the merger agreement. Following further discussions regarding the merger consideration, NEE indicated that it was unwilling to increase the proposed merger consideration above $25.00 in NEE stock per HEI common share in light of its acceptance of HEI’s proposed special cash dividend to HEI shareholders of $0.50 per share. On December 2, 2014, the parties agreed to embody the proposed merger consideration to HEI shareholders in a fixed exchange ratio of 0.2413 shares of NEE common stock for each outstanding share of HEI common stock, which was derived by dividing the agreed upon $25.00 per HEI common share merger consideration by the volume weighted average price of NEE common stock for the twenty trading days ended December 2, 2014.

On December 3, 2014, the HEI board met, together with management and representatives of J.P. Morgan and of Skadden. Representatives of Skadden provided advice on certain legal matters. HEI’s management then updated the HEI board with respect to the final calculation of the proposed exchange ratio. Representatives of J.P. Morgan then reviewed with the board of directors J.P. Morgan’s financial analyses regarding the proposed transaction with NEE based on the proposed exchange ratio, following which the representatives of J.P. Morgan delivered to the HEI board the oral opinion of J.P. Morgan that, as of such date, and based upon and subject to the various assumptions, considerations, qualifications and limitations set forth in its written opinion, the exchange ratio pursuant to the merger agreement was fair, from a financial point of view, to the HEI shareholders. J.P. Morgan subsequently confirmed this opinion in writing. See “ — Opinion of HEI’s Financial Advisor” beginning on page 43. J.P. Morgan’s fairness opinion was limited to the exchange ratio and did not take into account the value of either the special cash dividend or the shares of ASB Hawaii to be distributed to HEI’s shareholders in the bank spin-off. Following discussion, the HEI board unanimously declared that the merger agreement and the merger with NEE were advisable and in the best interests of HEI’s shareholders, adopted the merger agreement and recommended that HEI’s shareholders approve the merger agreement.

Following the conclusion of the HEI board meeting, HEI and NEE entered into the merger agreement, and shortly thereafter, NEE and HEI issued a joint press release announcing their entry into the merger agreement....

read ... The Entire Document

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

ALEC

Alliance Defending Freedom

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust 

Build More Hawaiian Homes Working Group

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Salvage The Rail

Save the Plastic Bag

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT