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Great Plains bid for Westar shifted to cash over stock

's bid forneighbor Westar Energy Inc.evolved from a mostly stock to mostly cash transaction over several months.

KansasCity, Mo.-headquartered Great Plains intends to acquire Westar in a $12.2 billiondeal that includesthe assumption of $3.6 billion of Westar debt. The combined company would servemore than 1.5 million customers in eastern Kansas and western Missouri and own nearly13,000 MW of generating capacity. The two companies already share ownership of theWolf Creek nuclearplant.

In aJuly 14 registration statementfor a stock offering in conjunction with the deal, Great Plains detailed how itemerged from a group of more than a dozen companies initially contacted about theirinterest in Westar to secure the deal.

The nuclearplant, in fact, appears key to the broader deal. In the registration statement,Great Plains said its chairman, president and CEO, Terry Bassham, met regularlywith Westar President and CEO Mark Ruelle to discuss the 1,205-MW Wolf Creek plant.Each company owns a 47% interest in the plant, which began operating in 1985.

Basshamin early 2015, according to the registration statement, raised interest in discussinga "business combination" with Westar to Ruelle. Ruelle at the time indicatedWestar was not for sale, but if it were, its board would likely favor being acquiredat a premium.

By spring2015, according to the statement, Westar received explicit expressions of interestfrom two other companies besides Great Plains. Neither was named. In late September2015, one of those other companies made a nonbinding valuation of Westar, outlininga cash-and-stock proposal that placed a premium of about 25% on Westar's stock price,which closed at $37.87 as of Sept. 28, 2015.

In earlyOctober 2015, Bassham met with Ruelle and suggested an offer consisting of 70% stockand 30% cash, with a premium of 20% to 25% over Westar's stock value at the time.

Laterin October 2015 a third company, an investment fund focused on infrastructure, expressedinterest in Westar, according to the registration statement. Soon after, Westarhired Guggenheim Securities LLC as its financial adviser and Baker Botts as itslegal counsel.

In January,Westar asked one of the two companies that had earlier expressed an interest indealing — not Great Plains — if it wanted to make a formal bid. That company declined.In February, Ruelle asked the second company from the previous spring and GreatPlains to update their interest. Both did, and Great Plains revised its potentialoffer, suggesting 50% stock, 50% cash and a 20% premium to Westar's stock price.

At thatpoint, Westar then asked Guggenheim to contact various parties to gauge their interestin the company. Guggenheim contacted 16, and nine including Great Plains agreedto confidentiality agreements. Two dropped out soon after. On March 10, it becamepublic that Westar wasassessing its strategic alternatives. Westar's stock closed that day at $46.90.

Westarreceived five initial proposals. Great Plains valued Westar shares at $54.50, offering65% cash and 35% Great Plains common stock. Other bids valued Westar between $50.50and $55.11 per share. Two of the other proposals were all-cash, and the other twowere a mix of cash and stock.

GreatPlains in April received an equity investment from OCM Credit Portfolio LP, a unitof the Ontario Municipal Employees Retirement System, or OMERS, to the Westar transaction. It revisedits offer again, valuing Westar at $58.25 per share and offering 85% cash and 15%stock, and said it would be willing to go as high as $60 per share, with a mix of90% cash and 10% stock.

Alongwith the Great Plains proposal, Westar received three others. One valued Westarat $54-$56, offering 45% cash and 55% stock. The two remaining bidders both pleadedfor additional time. One valued Westar at $52 and offered all cash; the other valuedWestar at $51, offering 80% stock and 20% cash.

Westarthen entered into negotiations with Great Plains and the bidder offering the next-highestvaluation. That bidder revised its offer, valuing Westar at $56, offering $25 incash and the remainder in stock. Great Plains was asked to accept changes to proposedtermination fees if the merger did not go through, which it did. Great Plains alsoupped its offer again, valuing Westar at $60 per share, and agreed to add a Westarboard member to the Great Plains board of directors.

The transaction,announced May 31, hasbeen submitted to FERCand Kansas regulators,among others, for approval. Closing is anticipated for spring 2017.