Aquila Investors Say They Oppose Sale

BLUE SPRINGS, Mo. - Aquila Inc. on Wednesday continued to make its case for shareholders to support its proposed acquisition by Great Plains Energy Inc. and Black Hills Corp. later this year.

But shareholders speaking at the utility's annual meeting largely criticized the idea, saying the deal undercut investors.

"I find it insulting that the day this deal was announced, the shares were higher than what you sold it for," Irene Tebo of Harrison Township, Mich., told Richard Green, the company's chairman and chief executive, during a question-and-answer period. "You're selling us down the river."

Green, however, doubted the company could do better.

"I think this is a good deal for the shareholder," he said, adding that shareholders will likely be asked to vote on the acquisition in late July or early August.

Kansas City-based Aquila, which owns electric and gas utilities in Missouri, Colorado, Kansas, Nebraska and Iowa, announced in February it plans to sell its assets to Great Plains and Black Hills in separate transactions for a combined $2.6 billion. The cash-and-stock deal valued Aquila at $4.54 per share. The shares closed at $4.67 the day before the acquisition was announced.

Since then, hedge fund Pirate Capital LLC has spearheaded opposition to the deal, publishing a Web site with its analysis of the transaction and even giving out T-shirts and buttons featuring Green's face.

Officials with the hedge fund, who didn't speak at the meeting, have said they believe last year's auction process to find a buyer was flawed and that the company is worth $5 or more per share. The fund filed a lawsuit last week to halt the deal, arguing the company's board of directors abandoned its fiscal responsibility in approving the sale.

The hedge fund called for shareholders to withhold their votes for the company's three directors up for re-election, but Aquila said Irvine O. Hockaday Jr., Heidi E. Hutter and Stanley O. Ikenberry were re-elected Wednesday after 88.6 percent of the company's outstanding shares were voted.

Some audience members said they think Aquila, which has spent years selling off assets to alleviate its crushing debt and focus on the utility business, should be given an opportunity to see if it could return to its once profitable ways. Aquila's stock price reached about $40 a share in 2001.

"The rebuilding, restructuring - I think there's a story there," said Stephen Platt, of St. Louis. "I think it's a well-run company and kind of would like to see what it can do."

Green agreed that the company is poised to do better. But he said Great Plains, with a better balance sheet, strong growth strategy and an investment-grade bond rating, was much more likely to be successful.

"There is an obligation that when we see an offer to accelerate value to shareholders, to put that offer to shareholders," he said.

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On the Net:

Aquila Inc.: http://www.aquila.com

Pirate Capital's Aquila Web site: http://www.badaquiladeal.com