US utility Allete goes private in $6.2 billion deal

Reuters

Published May 06, 2024 07:26AM ET

Updated May 06, 2024 03:48PM ET

By Seher Dareen and David French

(Reuters) -U.S. utility Allete (NYSE:ALE) said on Monday that it had agreed a deal with investment firms Global Infrastructure Partners and CPP Investments to be taken private at a $6.2 billion valuation, inclusive of debt.

The transaction is a rare example of a U.S. utility being taken private by investment firms, and comes at a time when such companies are receiving increased investor interest as technological innovations, such as artificial intelligence and data centers, boost power demand.

For utilities such as Allete, this hunger for power comes as they are implementing a shift to greener forms of generation, creating the need for significant investment in their networks.

Allete CEO Bethany Owen told Reuters that the Minnesota-based company's strategy involved spending $4.3 billion on renewables over the next five years, and further billions on investments after that. Raising these sums, while being a smaller utility in the public markets, would have been challenging.

"We were looking for the right partners to provide ready access to capital so that we could execute that transformative strategy," said Owen, who will continue in her role after the transaction closes in mid-2025.

The cash offer of $67 per share for Allete represented a 19% premium to the company's closing share price on Dec. 4, a day before Reuters reported the power company was exploring a sale.

"This is a modest premium on several angles," said Guggenheim utilities research analysts, adding this "unique" deal would not set a precedent for other go-private deals.