A Duluth-based energy company announced late Tuesday it has signed a definitive agreement to purchase one of St. Michael’s largest industrial employers, U.S. Water Services.
The transaction will total about $168 million, giving ALLETE, Inc. an 87 percent share of the company, the other 13 percent remaining with the employees and management of U.S. Water via stock ownership. ALLETE said it would purchase that 13 percent via a transaction program based on the company’s future earnings.
Headquartered here in St. Michael, ALLETE has a national footprint and serves more than 3,600 industrial customers, including a significant number of Fortune 500 companies and various ethanol and biodiesel plants around the Upper Midwest. U.S. Water provides integrated water management for industry, combining chemical equipment, engineering and service for customized solutions to reduce water and energy usage and improve efficiency, the company states.
The recent focus has been on sustainable use, something of importance to the biofuels industry, which was under scrutiny for water waste, and the company also has been growing in the power generation and midstream oil and gas industry.
“Water and energy a intricately linked, and the attention to that nexus is increasing,” said Al Hodnik, CEO and president of ALLETE. “Just as with energy, regulations and social expectations will increasingly drive water conservation, especially as water scarcity becomes a growing challenge. We believe the demand for sustainable water management solutions will increase over time as large users seek ways to enhance efficiency and improve their bottom line.”
The acquisition is consistent with ALLETE’s stated strategy of investing in energy infrastructure, the company said in Tuesday’s statement.
“We are excited about joining the ALLETE team and believe U.S. Water will be a great fit,” said Allan Bly, founder and longtime CEO of U.S. Water Services. “The combination will provide a platform for long-term success and growth for our company and employees.”
Bly added that U.S. Water’s management team is expected to remain in place at the St. Michael company headquarters.
More from the release:
U.S. Water generated revenue of approximately $120 million during 2014, and ALLETE projects future revenue growth of 10 percent to 15 percent annually. ALLETE expects the acquisition to provide long-term earnings growth and diversity, and have no material impact on 2015 earnings per share. ALLETE’s previously stated 2015 earnings guidance is unchanged, and excludes transaction costs. The transaction will be financed with a combination of cash, equity raised from existing programs and temporary short-term debt.
“We are focused on providing sustainable solutions to our customers,” said Hodnik, “and our EnergyForward and Power of One initiatives at Minnesota Power, renewable energy investments at ALLETE Clean Energy, and investment in U.S. Water are great examples.”
ALLETE remains predominantly a regulated utility through Minnesota Power, Superior Water, Light & Power and an investment in the American Transmission Company. Minnesota Power is well positioned for the future as it executes on its EnergyForward initiative and serves a potentially growing industrial customer base. ATC is poised for future growth both organically and through its partnership with Duke Energy. ALLETE’s infrastructure and related services businesses include ALLETE Clean Energy, BNI, and U.S. Water Services. ALLETE Clean Energy has a growing portfolio of wind generating facilities, and U.S. Water provides integrated water management to a growing base of industrial and commercial customers. ALLETE is committed to earning a financial return that rewards its shareholders, allows for reinvestment in its business and sustains growth. The company has a long-term objective of achieving minimum average earnings growth of 5 percent annually and maintaining a competitive dividend payout.
Financial advisory services for this transaction were provided by Piper Jaffray and J. P. Morgan. More information about U.S. Water Services, Inc. can be found at its website: www.uswaterservices.com. ALLETE’s corporate website is www.allete.com.
ALLETE is an energy company headquartered in Duluth, Minn. In addition to its electric utilities, Minnesota Power and Superior Water, Light and Power of Wisconsin, ALLETE owns ALLETE Clean Energy, based in Duluth, BNI Coal in Center, N.D., and has an eight percent equity interest in the American Transmission Co. More information about ALLETE is available at www.allete.com.