But a merger also will move ultimate control of the 500,000-customer company out of state, eliminate a stock dividend that investors have enjoyed for years and expose investors to a capital gains tax from the sale of their shares, opponents have said.
The proposed merger also has raised concerns that DP&L’s service could suffer if AES cuts back on maintenance spending. A former AES executive has told Indiana and Ohio utility regulators that AES cut back on maintenance spending after its 2001 purchase of Indianapolis Power & Light Co. and its parent company, which he said led to maintenance problems.
Those included explosions in underground cable vaults in downtown Indianapolis.
In response, the Indiana Utility Regulatory Commission in July requested an independent audit and inspection of the Indianapolis utility’s downtown power distribution network. The auditor is to report back to the commission Nov. 30.
The shareholders’ vote will be announced at their annual meeting, scheduled to start at 10 a.m. in the Mandalay Banquet Center in Moraine. AES, a Fortune 200 company based in Arlington, Va., is offering to buy all of DPL’s nearly 116 million outstanding common shares for $30 apiece in cash.
DPL and AES also need state and federal regulatory approvals to conclude the merger, which they hope to do by late this year or early 2012.
AES, a Fortune 200 company based in Arlington, Va., has annual revenue of $17 billion and 29,000 employees across five continents, compared with $1.8 billion and 1,500 employees for DPL.
DP&L’s electricity rates are locked in through the end of 2012, having been approved by Ohio regulators. The company serves all or parts of 24 counties, ranging from Van Wert County in the north to Clinton and Warren counties south and from the Indiana line east to parts of Clark, Champaign, Union and Delaware counties.
The city of Dayton has secured agreements with AES and DPL that will protect the annual payroll tax revenues the city receives from DPL through the end of 2016; give the city 180 days’ advance notice if AES plans to relocate DPL’s headquarters before the end of 2017, and limit any layoffs AES might plan in DPL’s work force until three years after a merger.
An eventual loss of DPL’s corporate headquarters would mirror the departures of the NCR Corp. and Mead Corp. headquarters from Dayton in recent years.
David Look, a DPL shareholder in Beavercreek, said he is concerned that the quality of DP&L’s electric service could suffer over time because AES’ senior management is in another state and would not be directly accountable to local customers.
“It’s better to have the bosses in the area where the service is being provided,” Look said Wednesday.
Two large business customers of DP&L, Kroger Co. and ConAgra Foods Inc.’s Troy plant, said through spokesmen that they have been satisfied with DPL’s electric service and have no reasons to believe that would change under AES ownership.
Jim Kay, a shareholder in Washington Twp., questioned why DPL’s board wants to sell to AES when DPL’s stock has been consistently outperforming the other company’s. DPL’s shares (NYSE: DPL) closed Wednesday at $30.07, down 1 cent, while those of AES (NYSE: AES) closed at $10.36, down 36 cents.
Shareholders also have questioned why DPL agreed to pay a $106 million termination fee if the merger fails, while AES has no requirement to pay a fee. DPL says it can avoid the fee, even if shareholders reject the merger, as long as DPL’s board of directors continues to advocate the merger to the shareholders.
In lawsuits, DPL shareholders have accused the company’s board of failing to try to obtain a better price for the company, since DPL agreed not to solicit bids that would compete with the AES offer. Shareholders, noting that the board and senior DPL management stand to collect millions of dollars in stock profits if the merger takes place, questioned whether the board and executives have tried to enrich themselves as the expense of shareholders. DPL responded that the merger would be in the company’s long-term best interest.
DPL said it has reached settlements of three lawsuits challenging the merger in federal court, while seven lawsuits still remain in state court.
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