UPDATE: RWE: American Water Placement Proceeds About $200 Million
June 05 2009 - 3:27AM
Dow Jones News
German utility RWE AG (RWE.XE) Friday said it has reduced its
stake in U.S. based water supplier American Water Works Co (AWK) to
below 50% in a secondary public offering, earning around $200
million in proceeds before deducting bank fees.
Essen-based RWE said in a written statement the sale of 11.5
million of its shares in American Water reduces its stake in the
company to around 49% from about 60% before.
RWE's stake in American Water could fall further given that it
has granted the underwriters of the transaction a greenshoe option
to purchase up to 3.9 million of its shares. If the greenshoe is
fully exercised, RWE's stake in American Water would fall to around
47%.
Having sold more than 50% in American Water, RWE now is able to
fully deconsolidate the U.S. water utility from its balance sheet,
which will result in a reduction of net debt by around EUR4.5
billion, RWE said.
Equinet analyst Michael Schaefer, who recommends accumulating
RWE shares, in a research note said the deconsolidation of American
Water's net debt lowers RWE's economic net debt to the lower end of
the target range.
The RWE debt factor drops to 2.9-times earnings before
interests, taxes, depreciation and amortization from 3.4-times
Ebitda, he said.
"Hence, RWE's leverage factor drops to the lower end of the
target range of 2.8 to 3.4-times Ebitda, making the company one of
the least-geared in the sector," Schaefer said.
A spokesman for RWE said the company still intends to fully
divest all of its shares in American Water.
"Our goal is to sell all of American Water but the exact
timeframe for achieving this depends on the further market
environment," he said.
American Water early Friday said it has placed 26 million shares
at $17.25 a share in a secondary public offering.
Merrill Lynch & Co., Citi and Goldman, Sachs & Co. are
acting as joint book-running managers in connection with the
offering.
Around one year ago, RWE sold around 36% of American Water's
shares at $21.50 a share in an initial public offering. The IPO
price was lower than had been expected and resulted in a EUR600
million impairment charge that considerably burdened RWE's 2008
earnings.
Company Web site: www.rwe.com
-By Jan Hromadko, Dow Jones Newswires; +49 69 29 725 503;
jan.hromadko@dowjones.com