Crius Energy Trust (TSX: KWH.UN) provides competitive electricity and natural gas products to over 1 million residential and commercial customers in 19 states and the District of Columbia in the United States. Shares surged 36.86% on Thursday, February 7, 2019. Over the past three months, Crius has seen an average daily volume of 205,472 shares. However, on Thursday, 7,442,059 shares traded hands, equating to C$55.82 million in dollar volume.
Shares surged on Thursday after Crius Energy announced it has entered into a definitive agreement with Vistra Energy Corp. (NYSE: VST). Under the agreement, Vistra will acquire Crius Energy in exchange for a cash payment of C$7.57 per trust unit. The consideration of C$7.57 represents a 38% premium over the closing price on February 6, 2019. In addition, Crius unitholders “will receive Crius Energy’s previously-declared distribution for the first quarter of 2019 in the amount of C$0.209 per unit for total consideration in the amount of C$7.779 per unit.” After the closing of this deal, Vistra “will be the leading residential electricity provider in the nation with operations in 19 states and the District of Columbia.” Michael Fallquist, CEO of Crius, commented, “Partnered with Vistra, Crius Energy will be well-positioned to continue providing our customers and strategic partners with differentiated products and services.” Here is the full press release detailing Vistra’s acquisition of Crius:
Crius Energy Trust Press Release
IRVING, Texas, Feb. 07, 2019 (GLOBE NEWSWIRE) — Today, Vistra Energy (VST) and Crius Energy Trust (TSX: KWH.UN) announced they have entered into a definitive agreement pursuant to which Vistra will acquire Crius Energy for cash consideration of C$7.57 per trust unit. Following the closing of the transaction, Vistra will be the leading residential electricity provider in the nation with operations in 19 states and the District of Columbia.
“We are excited to announce this transaction, which will accelerate Vistra’s retail growth expansion plans via the acquisition of a high-quality electricity and gas retailer serving primarily residential and small business customers,” said Curt Morgan, Vistra’s President and Chief Executive Officer. “The Crius Energy portfolio has a high degree of overlap with Vistra’s generation fleet and complements Vistra’s existing municipal aggregation and large commercial and industrial portfolio in the Midwest and Northeast markets. We welcome the Crius Energy team to the Vistra family.”
Morgan added, “This transaction is consistent with Vistra’s stated strategy to grow our retail business at attractive multiples while remaining committed to our capital allocation and deleveraging plans.”
The announcement of this transaction follows a competitive strategic review process led and unanimously recommended by the Independent Directors of Crius Energy, and unanimously approved by Crius Energy’s Board of Directors.
“We are pleased to announce this transaction and are confident that it is in the best interests of our unitholders and other stakeholders,” said Brian Burden, Chairman of Crius Energy’s Board of Directors. “This transaction is the result of an exhaustive review of strategic alternatives undertaken by our Board of Directors, with the assistance of outside advisors, to maximize unitholder value and unlock the company’s intrinsic value, while eliminating execution risk. We are confident that this transaction represents the best outcome for our unitholders and other stakeholders and look forward to completing the transaction.”
The purchase price of C$7.57 per unit represents an approximately 38 percent premium to Crius Energy’s unit price of C$5.48 as of market close on Feb. 6, 2019. In addition to the purchase price, Crius Energy unitholders will receive Crius Energy’s previously-declared distribution for the first quarter of 2019 in the amount of C$0.209 per unit for total consideration in the amount of C$7.779 per unit. Under the definitive agreement, Crius Energy has agreed not to declare any further distributions prior to the closing.
“We are excited to have reached an agreement with Vistra, a leading integrated power company serving approximately 2.9 million customers with more than 40 GW of generation,” said Michael Fallquist, Chief Executive Officer of Crius Energy. “Partnered with Vistra, Crius Energy will be well-positioned to continue providing our customers and strategic partners with differentiated products and services.”
- 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 TWhs of load acquired, improving Vistra’s match of its generation to load profile to approximately 45 percent
- 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
- 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
- Approximately US$328 million purchase price (assuming an exchange rate of US$0.76 for each C$1), which Vistra intends to fund with cash on hand, plus assumption of Crius Energy net debt of approximately US$108 million
- Attractive premium of 38 percent above Crius Energy’s Feb. 6, 2019 closing price paid to Crius Energy unitholders
- Acquisition economics exceed Vistra’s investment threshold of mid-to-high teens unlevered returns; achieved only through the expertise and scale of the Vistra retail business
- Tuck-in acquisition with no anticipated changes to Vistra’s capital allocation or deleveraging plans
- Continued “focus on the customer” approach
- Unanimous recommendation of Crius Energy’s Independent Directors in favor of the transaction, with voting and support agreements representing approximately 17 percent of Crius Energy’s units executed in support of the transaction
Transaction and Approvals
The proposed transaction has been structured as a sale of two wholly owned subsidiaries of Crius Energy that indirectly own the Crius Energy business. The definitive agreement 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.
The proposed transaction is subject to the approval of at least two-thirds of Crius Energy’s unitholders. Unitholders of Crius Energy representing approximately 17 percent of the units, including all of the directors and senior officers of Crius Energy, have entered into voting and support agreements with Vistra in support of the transaction.
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 Improvements Act, and approval by the Federal Energy Regulatory Commission (FERC).
Pending the receipt of all necessary approvals and the fulfillment 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 at www.vistraenergy.com.
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 will also be made available on SEDAR under Crius Energy’s issuer profile at www.sedar.com.
Crius Energy Board Recommendation
Crius Energy’s Board of Directors, on the unanimous recommendation of its Independent Directors, approved the transaction and will recommend that Crius Energy’s unitholders vote in favor 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 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 advisor to Crius Energy and Bennett Jones LLP and Baker Botts LLP are serving as legal advisors to Crius Energy.
RBC Capital Markets is serving as financial advisor to Vistra and Latham & Watkins, LLP is serving as legal advisor to Vistra.
About Vistra Energy
Vistra Energy (VST) is a premier, integrated power company based in Irving, Texas, 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-MW/1,200-MWh system in Moss Landing, California.
About Crius Energy Trust
With approximately 1 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 multi-channel 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.
Cautionary Note Regarding Forward-Looking Statements
Material information pertaining to Crius Energy may be found on SEDAR under the Trust’s issuer profile at www.sedar.com or on the Trust’s website at www.criusenergytrust.ca.
The information presented herein includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which Vistra Energy Corp. (“Vistra Energy”) and Crius Energy Trust (“Crius Energy”) operate and beliefs of and assumptions made by Vistra Energy’s and Crius Energy’s management, involve risks and uncertainties, which are difficult to predict and are not guarantees of future performance, that could significantly affect the financial results of Vistra Energy or Crius Energy. The definitive agreement contains conditions to closing and there is no assurance that these conditions will be fulfilled prior to the outside date provided therein. All statements, other than statements of historical facts, that are presented herein, or in response to questions or otherwise, that address activities, events or developments that may occur in the future, including such matters as activities related to our financial or operational projections, projected synergy, value lever and net debt targets, capital allocation, capital expenditures, liquidity, projected Adjusted EBITDA to free cash flow conversion rate, dividend policy, business strategy, competitive strengths, goals, future acquisitions or dispositions, development or operation of power generation assets, market and industry developments and the growth of our businesses and operations (often, but not always, through the use of words or phrases, or the negative variations of those words or other comparable words of a future or forward-looking nature, including, but not limited to, “intends,” “plans,” “will likely,” “unlikely,” “believe,” “expect,” “seek,” “anticipate,” “estimate,” “continue,” “will,” “shall,” “should,” “could,” “may,” “might,” “predict,” “project,” “forecast,” “target,” “potential,” “forecast,” “goal,” “objective,” “guidance” and “outlook”), are forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. Although Vistra Energy and Crius Energy believe that in making any such forward-looking statement, Vistra Energy’s and Crius Energy’s expectations are based on reasonable assumptions, any such forward-looking statement involves uncertainties and risks that could cause results to differ materially from those projected in or implied by any such forward-looking statement, including but not limited to adverse changes in general economic or market conditions (including changes in interest rates) or changes in political conditions or federal or state laws and regulations and the ability of the parties to achieve all of the conditions to the closing in order to consummate the transaction (including obtaining any necessary regulatory approvals and Crius Energy unitholder approval for the transaction).
Any forward-looking statement speaks only at the date on which it is made, and except as may be required by law, neither Vistra Energy nor Crius Energy will undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible to predict all of them; nor can Vistra Energy or Crius Energy assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.
Article By: Andrew Rego