If you have been following the merger trends in utilities, this secondary offering may be of little surprise. PP&L Corporation (NYSE: PPL) priced its offerings of common stock and equity units and the offering is effectively to help it pay for the 3.6 billion pounds Sterling Bridge Term Loan Facility used to complete the Central Networks electricity distribution acquisitions in the United Kingdom. Investors often hit stocks on secondary offerings but this offering was needed and the pricing seems to be rather high compared to other spot deals.
For the equity offering, PP&L is selling 80 million shares of common stock at $25.30 per share. PPL has also priced its offering of 17 million equity units, an increase from the previously announced 15 million units, with a stated amount of $50 per unit, for an aggregate amount of $850 million. The equity units carry a total annual distribution rate of 8.75 percent.
As far as the equity units, those are referred to as follows: “The reference price for the equity units is $25.30 per share, the public offering price in the concurrent common stock offering. The threshold appreciation price for the equity units is $30.99, which represents a premium of about 22.5 percent over the reference price.”
BofA Merrill Lynch and Credit Suisse are the lead book-runners for both the common stock and equity units offerings. Barclays Capital, Morgan Stanley and Wells Fargo Securities are joint book-runners for the common stock offering; and Citi, J.P. Morgan, and UBS are the joint book-runners for the equity units offering. The utility granted the underwriters an overallotment option to buy 12 million shares of common stock. It also gave the underwriters an overallotment option to purchase up to 2.55 million additional equity units worth $127.5 million if overallotments are needed.
The sum here is nearly $3 billion in the deal all said and done versus a market cap of $12.4 billlion. Shares closed on Monday at $25.69 and are indicated around $25.60 versus this $25.30 pricing this morning and its 52-week trading range is $23.75 to $28.80.
JON C. OGG
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