Sunday, December 13, 2015

Reports: Empire District Electric for sale

Empire District Electric Company officials won't confirm reports from Reuters and Bloomberg  that they are considering a sale, but admit they are  "exploring strategic alternatives."

On Sunday, the company issued the following statement:

-It is the policy of The Empire District Electric Company (“Empire” or “the Company”)(NYSE:EDE) not to confirm or deny market rumors. However, in response to recent media reports concerning the Company and last Friday’s stock trading activity, Empire confirms that it is in the early stages of exploring strategic alternatives, and has retained a financial advisor with regard to the exploration of such strategic alternatives. No decision regarding the strategic alternatives has been made by the Board of Directors.

Due to the preliminary nature of this exploration, neither the Company nor any of its representatives will be providing additional comment at this time. No assurances can be given that Empire’s Board of Directors will act on any specific strategic alternative. The Company does not intend to make any further press release or announcement regarding these matters unless and until there is a material change in circumstances.

The Company remains committed to continuing to provide safe and reliable service to its customers.

An article posted by Bloomberg Friday featured the following information:

Empire District Electric Co., a utility that supplies energy across the Midwestern U.S., is exploring a sale, according to people familiar with the matter.

The Joplin, Missouri-based company is working with an adviser as it seeks potential buyers, said the people, who asked not to be identified because the matter is private. The process is at an early stage, no final decision has been made, and the company may decide not to pursue a sale, they said.

Empire District’s shares rose 8.3 percent on Friday, giving the company a market value of about $1.1 billion.

Top Empire District Electric executives have $21 million in golden parachutes


Anonymous said...

Everybody hates Empire but these are good paying, stable, local jobs that would leave the area. The economic impact on this community would be HUGE. Another company will be pulling those wage dollars out of Joplin. The only winner is Brad Beacher and his GIGANTIC golden parachute. Greed is good? Not for Joplin...

Anonymous said...

According to the latest proxy statement the CEO is entitled to over $7,000,000.000 in severence if the company is sold. Of course that is what he is going to push for...

Anonymous said...

While there are downsides in terms of some jobs lost locally in all likelihood, customers may actually benefit from a larger utility with more resources and buying power. Not being owned by an investor owned utility would also be beneficial. Paying all of the dividends and trying to keep certain numbers good for Wall Street is a cost borne by those customers locally, many of which can't afford it.

Anonymous said...

Compare the change of ownership payouts for senior management in 2015 with those of the 2013 and earlier proxy statements.

Millions more to people who are entirely replaceable in a company that is a regulated monopoly (meaning it has no competition) and runs itself.

Just who are these people, and how did they get where they are?

There's a very interesting story there, Randy. If you want to provide investigative journalism,particularly of a kind the Globe won't offer, there's something waiting to be found. And I'm not speculating.

Anonymous said...

In the hostile environment that environmentalists have set up American power companies hardly "run themselves", they have to constantly navigate an ever increasing thicket of ever more insane regulations mandating more and more cruft, while providing power as inexpensively as they can. To not go bankrupt they also have to convince the state authorities that the price increases required by this insanity are legitimate, and the public sees nothing but that bottom line of apparently paying more and more for "the same thing".

I also get the sense that 8:47 PM vastly underestimates the technical complexity of running a local grid, it is by no means simple.

Anonymous said...

Re 8:47 and 3:03:

If it helps with your interest level Randy, Joplin School Board member Ron Gatz is one of the individuals who stands to make millions by directing middle class jobs out of our community. That would be page 36 of the 2015 proxy statement in the SEC filings of the Investor section of

3:03 is correct, it is highly complex and their normal compensation is deserved. However, the massive inflation of their severences in the past few years is highly suspect considering they are the ones that would initiate and navigate a sale of the company. The Board of Directors of EDE gave them a huge incentive to do something very bad for this community.

Anonymous said...

Re 3:39

A non-investor owned utility buying an investor owned utility would be remarkable and exceedingly unlikely. Someone will be paying hundreds of millions for EDE and they or their investors will expect an adequate ROI on that purchase. That will come in the form of rate increases and job cuts. Both will bad for Joplin.

Anonymous said...

Estimated lump-sum severance payments and other benefits payable to named executive officers in the event of a Change In Control based on involuntary termination are as follows:
Cash Change In
Severance Control
Benefit Benefit
R.F. Gatz 1,129,307 693,012 203,221 16,079 1,086,996 3,128,615

Modified to fit page. More information available in SEC filing as stated by 4:46. Thanks, 4:46!

Anonymous said...

(A reconstruction of comment I previously sent which seems to have been lost.)

4:46 AM: I'm pretty sure the idea here is to prevent the executives and key employees from fighting a "change in control" that might benefit the shareholders, because they don't get these benefits unless they also lose their jobs after the change, or quit without getting a new job. If they don't get a similar job at around the same time, it wouldn't be much of a windfall.

The proxy statement (links for 2006-15 here) says this policy was established in 1991 and most recently modified in 2008. But the "massive inflation" of the estimated severances is more complicated; it looks like it has a lot to do with where they are in their stock compensation plan, and the tax gross up (remember Obama's first Treasury Secretary and most notable tax cheat, Timmy Geithner, who collected a gross up from the IMF but didn't pay his taxes).

If the gross up is correctly calculated, it would be subtracted from these figures for their bottom line figure since it's just a payment to cover taxes, which a change in control could substantially increase over what they'd normally pay. After subtracting that, just looking at the top line, Mr. Gipson 2007 (first year estimated payments are broken out)-2011, Mr. Beecher 2012-2015:

2007: 1,994,859
2008: 1,850,510
2009: 2,248,025
2010: 2,748,792
2011: 3,380,345
2012: 1,986,975
2013: 1,851,208
2014: 3,004,574
2015: 4,662,311

Anonymous said...

Re 9:04

They can choose to leave the company and not seek employment and recieve the full amount plus benefits. That is a pretty sweet deal.

When they do get their massive windfalls they will indeed be required to pay taxes. That goes without saying. Why would you spend that much time making the distinction between gross and net? They won't have to work again. Their employees that helped put them in their situation will be lucky to have work when a deal closes.

Anonymous said...

They can choose to leave the company and not seek employment and recieve the full amount plus benefits. That is a pretty sweet deal.

Have you ever tried to get a job with a several year gap in your resume? It's very hard, as I found out after taking some time off for more college.

Why would you spend that much time making the distinction between gross and net?

Because under the normal state of affairs they wouldn't be paid the tax gross-up, which is not the same as their normal gross income. Tax gross-ups happen in special circumstances, like here where someone is paid a lump sum covering multiple years and that causes extra taxes to kick in.

They won't have to work again.

Unless they're close to retirement, that's not a tremendous amount of money. For example, at first glance, top dog Bradley P. Beecher would seem to have honestly earned a lot of his compensation, he got a real degree in chemical engineering, registration as a professional engineer, joined the company as a staff engineer in 1988, and worked his way to the top, which is something we're supposed to celebrate.

I suppose he and his family might be satisfied with $4,662,311 before normal taxes to cover the 15 years until the normal retirement age of 65, but is he the sort of person who'd want to stay idle that long? And it wouldn't be at all wise, things are likely to get ugly in this country before he's likely to die and electrical company jobs ought to be pretty solid, no electricity == no modern civilization.

Their employees that helped put them in their situation will be lucky to have work when a deal closes.

Some of them, yes, billing for example would almost certainly be consolidated. But the power plants and the distribution system won't run themselves, they need constant attention, maintenance and upgrades.