Regulators reject $5 billion sale of Cleco

Louisiana regulators have recently rejected a US$4.9 billion bid by international investors to buy Cleco, a Louisiana-based public utility holding company and owner of regulated electric utility Cleco Power LLC that serves approximately 281,000 customers.

In October 2014, a group of North American long-term infrastructure investors led by Macquarie Infrastructure and Real Assets (MIRA) and British Columbia Investment Management Corporation (bcIMC), together with John Hancock Financial and other infrastructure investors, agreed to acquire Cleco Corporation. 

The stock cost when the transaction was announced in 2014 was about US$46 a share. After the rejection, Cleco’s stock price dropped US$4.37 from US$49.59 to US$45.22 per share.

There have been some reasons for the rejection of the Louisiana Public Service Commission to the transaction:

• Potential increase of monthly rates
• Under the deal, the new owners of the company would have been able to collect taxes from the customers as part of the monthly rates, rather than turning these proceeds to state and federal authorities.
• Another reason was that Macquarie Infrastructure and the rest of the investors have planned to sell the utility in 8 to 10 years due to the nature of the private equity funds they use to acquire the assets.
• Additionally the owners planned to finance the transaction, adding a double leverage on the asset.

Andrew M. Chapman, the managing director of Macquarie Infrastructure Management (USA), said:

"I have had only about 30 minutes to speak during a seven-hour hearing that featured opponent after opponent criticizing the sale. In previous purchases of American utility companies, the Macquarie partners have kept the management local and didn’t lay off employees. The investors are using money from pension funds and thus are seeking stable investments".