Wednesday, November 04, 2015

Some Cleco Corporation

I initiated a position in Cleco Corporation (Ticker: CNL) today at an average price of $52.68 (~13% position). There is also an upcoming dividend payout of $0.40 with an ex-div date tomorrow. This utility company is being acquired for $55.37 in cash by an investor consortium made up of Macquarie Infrastructure, British Columbia Investment and John Hancock Financial. This deal is estimated to close in Q1 based on the final approval from the Louisiana Public Service Commission. Next week there will be an Administrative Law Judge hearing to review the commitments made by the company. There’s been some criticism by the public on this deal, but that is always the case with any public utility merger. Macquarie has plenty experience in acquiring public utilities and I believe they will offer the appropriate commitments that will appease the utility regulators. I am currently modeling a close by January 31, 2016, which will equate to a net gain of 5.85% including dividends (~24% annualized).


At November 04, 2015, Anonymous Anonymous said...

How much was your average price. I suppose $53.68 was a typo.

At November 04, 2015, Blogger Money Turtle said...

Thanks, for letting me know of the typo. I corrected the info... Too many deals and the numbers start to get fuzzy :)

At November 06, 2015, Anonymous Anonymous said...

Any problem with CNL?

At November 06, 2015, Blogger Money Turtle said...

It's market jitters as Cleco will be presenting their case to the ALJ next week. The ALJ will make a recommendation to the Committee as to whether to approve or reject the deal. The Committee will probably vote on this deal early next year, but the ALJ decision will be a big deal. Something definitely to keep an eye on... I believe this deal will ultimately be approved, but there will be a lot of noise.

At November 10, 2015, Anonymous Anonymous said...

I noticed the you had a typo on the symbol for this.

Are you still optimistic on this considering the price slippage?

Also, what do you think of FXEN?


At November 10, 2015, Blogger Money Turtle said...

Thanks for pointing out the typo. I'm still optimistic that this deal will go through. The drop in price is a concern. Right now, it's all about getting a sense as to which way the judge will decide and obviously how the commission will vote. My take is that Cleco will offer additional concessions to get this deal done. Looking at years of utility mergers, it is extremely rare that the commission votes down a merger.

Don't know anything about FXEN. I'll take a look at it...

At November 11, 2015, Blogger lamano said...

Hi Money Turtle,

Thanks for posting and sharing. I am also looking at this deal. Did you do any research on the committees stance?

The committee is comprised on 5 people: With the very limited info i could find, I think 1 will vote No 100%, 1 is probably not in favor but might be persuaded, 2 Probably vote in favor if Cleco listens to their demands, and the last one i could not find any info on...Together with the pre-brief that the staff of PSC still has issues, I think it chances are this one will drag on a little longer. See some detail on the committee below. Any idea on the downside risk if the committee votes no? ~ 10%-20%?

1. Holloway
Pretty sure he will vote No given his recent statements, and the public hearing of last year: . He pretty much hates the CEO and this deal.

2. Skrmetta
Seemed to be somewhat opposed, based on that second article stated above. Also, in case this deal falls through, an 'potential new bid' from say Iberdrola will be tough to get passed as it is both foreign and public. Not sure where he will vote, but if i had to pick, I would say No.

3. Angelle.
Found little information. Did make a statement that approval would depend on willingness of Cleco to address PSC staffs concerns.

4. Foster.
Little info: Found some info on his facebook where he is positibe about a preivous smaller deal where significant rate cuts materialized over the years. Cleco's current deal does not provide cuts anywhere near the 20% level he is talking about though

5. Boissiere. No info


At November 11, 2015, Blogger Money Turtle said...

The only one I can get a good read on is Holloway, who I agree will vote No. I don't think he will approve a sale to anyone. There's not much out there on the others to get a good read.

I think you can see a ~ 10% drop if the deal is scrapped. The company will likely hike its dividend in the event of a no deal. And will probably continue to shop the company around.


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