Exhibit No. 99.1
The following employee update and press release was issued on March 19, 1998:
MEDIA CONTACTS: MEDIA CONTACTS:
Michel' J. Philipp (785) 575-1927 Phyllis Desbien (816) 556-2903
INVESTOR CONTACT: INVESTOR CONTACT:
Bruce Burns (785) 575-8227 Andrea Bielsker (816) 556-2312
JOINT NEWS RELEASE
NEW AGREEMENT REACHED,
RESULTS IN FORMATION OF WESTAR ENERGY
SHAREOWNER MEETINGS SET FOR SUMMER
TOPEKA, Kansas, and KANSAS CITY, Missouri, March 19, 1998 (6:30 a.m.
CST) -- Western Resources (NYSE:WR) and Kansas City Power & Light Company
(NYSE:KLT) today announced a restructuring of their merger agreement, resulting
in the formation of a new electric company. Both companies will ask shareowners
to approve the transaction around June 30.
The new company -- to be named Westar Energy -- will be headquartered
in Kansas City, Missouri, and traded on the New York Stock Exchange. Under the
new agreement, each KCPL shareowner will receive $23.50 worth of Western
Resources common stock, subject to a collar mechanism, for each share of KCPL
common stock owned. In addition, for each KCPL common share owned, each KCPL
shareowner will receive one share of the new company -- Westar Energy -- with an
estimated value of between approximately $10.00 and $12.00 per share based on
current market conditions. This estimate is based on an analysis by KCPL and
Western Resources assuming that the
dividend for the first year of operation is $0.72 and assuming a normal electric
utility payout ratio. Since Westar Energy will be a newly formed entity with no
trading history, there can be no assurance that Westar Energy will trade at such
levels.
"This unique and creative approach will give the electric operations of
both companies a foundation for success in the new competitive environment,"
said John E. Hayes, Jr., Western Resources chairman of the board and chief
executive officer. "Shareowners will reap the benefits of the regulated utility
assets of Western Resources and KCPL and the upside potential of ownership in
Western Resources, a consumer services company with diversified holdings in
monitored security and energy companies.
"This transaction provides significant tangible benefits for all
involved," said Hayes. "Our mutual commitment to no employee layoffs and
long-range cost savings exemplifies what our two companies can do together. We
are delighted to build on each other's strengths to create a company poised for
the future." Western Resources and KCPL will contribute their respective
electric operations to form Westar Energy, which will be 80.1 percent owned by
Western Resources and 19.9 percent by KCPL shareowners.
"By combining the electric utility businesses of both companies, we are
creating a larger regional platform from which to provide customers with the
same reliable competitive energy services to which they are accustomed," said
Drue Jennings, KCPL's chairman of the board, president and chief executive
officer.
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"In addition, KCPL shareowners' ownership in Western Resources, one of
the most dynamic companies in the nation, has the potential for growth," said
Jennings. "Western Resources' management team has a demonstrated track record
for growth, having delivered to its shareowners a total return on their
investment of approximately 48% during the last year. We are extremely pleased
with this agreement and look forward to making it happen."
Westar Energy will continue to operate under the brand names of KCPL,
KGE, and KPL. The combined company will have more than one million electric
customers in Kansas and Missouri, $8.2 billion in assets and more than 8,000
megawatts of electric generation resources. Hayes will serve as chairman of the
board; Jennings will assume chief executive officer responsibilities of Westar
Energy.
A 10-member board of directors will govern Westar Energy. Six positions
will be appointed by Western Resources and four positions from KCPL.
Westar Energy's executive headquarters will be in Kansas City,
Missouri, customer service operations will be headquartered in Wichita, and its
field operations will be headquartered in Topeka.
Western Resources will continue to be headquartered in Topeka, Kansas,
and will include KLT, Inc., KCPL's unregulated operations; 80.1% of Westar
Energy; Western Resources' existing investments of 45% interest in ONEOK, Inc.,
the eighth largest natural gas distribution company in the nation; an 80%
interest in Protection One, the second largest monitored security company with
more than one million security
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customers in 48 states; and the Wing Group, international power project
developers. Three members of the KCPL board will join the Western Resources
board.
Western Resources will continue to trade on the New York Stock Exchange
under the symbol WR.
Salomon Smith Barney, Western Resources' investment banker, and Merrill
Lynch & Co., Inc., KCPL's investment banker, have presented fairness opinions to
the boards of directors of each company. The agreement must receive approval
from various regulatory agencies. The approval process should take approximately
12 months. It is expected the transaction will close by mid-year 1999.
Western Resources (NYSE:WR) is a consumer services company with
interests in monitored security and energy. The company has total assets of
approximately $7 billion, including security company holdings through ownership
of Protection One (NASDAQ:ALRM), which has more than 1 million security
customers in 48 states. Its utilities, KPL and KGE, provide electric service to
approximately 600,000 customers in Kansas. Through its ownership in ONEOK Inc.
(NYSE:OKE), a Tulsa-based natural gas company, Western Resources has a 45
percent interest in the eighth largest natural gas distribution company in the
nation, serving more than 1 million customers. Through its other subsidiaries,
Westar Capital and The Wing Group, the company participates in energy-related
investments in the continental United States and offshore.
For more information about Western Resources and its operating
companies, visit us on the Internet at http://www.wstnres.com.
Kansas City Power & Light Company (NYSE:KLT) provides electric power to
a growing and diversified service territory encompassing metropolitan Kansas
City, parts of eastern Kansas and western Missouri. KCPL is a low-cost producer
and leader in fuel procurement and plant technology. KLT Inc., a wholly owned
subsidiary of KCPL, pursues opportunities in nonregulated, primarily
energy-related ventures.
For more information about KCPL, visit http://www.kcpl.com.
This press release includes forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements reflect numerous assumptions, and involve a number of
risks and uncertainties. Among the factors that could cause actual results to
differ materially are: electric load and customer growth; abnormal weather
conditions; available sources and cost of fuel and generating capacity; the
speed and degree to which competition enters the power generation, wholesale and
retail sectors of the electric utility industry; state and federal regulatory
commission decisions; the ability of the combined company to achieve synergies;
the economic climate and growth in the service territories of the two companies;
economies generated by the merger; inflationary trends and interest rates and
the other risks detailed from time to time in the two companies' SEC reports.
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FACT SHEET
WESTERN RESOURCES/KCPL AGREEMENT
MARCH 19, 1998
TERMS OF AGREEMENT
Under the agreement, KCPL shareowners will receive both Western
Resources stock and Westar Energy stock. Upon closing of the transaction, KCPL
shareowners will receive shares of Western Resources common stock, with a value
at closing of $23.50 per share, subject to a collar. Western Resources
shareowners will continue to hold the common stock they currently own. At
closing, for every one share of KCPL common stock they currently own, KCPL
shareowners will also receive one share of Westar Energy with an estimated value
between approximately $10.00 and $12.00 per share based on current market
conditions. This estimate is based on an analysis by KCPL and Western Resources
assuming that the dividend for the first year of operation is $0.72 and assuming
a normal electric utility payout ratio. Since Westar Energy will be a newly
formed entity with no trading history, there can be no assurance that Westar
Energy will trade at such levels.
Western Resources will own 80.1% of Westar Energy's total common equity
and KCPL shareowners will own the remaining 19.9% of Westar Energy. KCPL
shareowners will own approximately 35% of Western Resources and Western
Resources' existing shareowners will own approximately 65% of Western Resources
based on current Western Resources stock price. It is anticipated that the
transaction will be tax-free to both Western Resources and KCPL shareowners and
accounted for as a purchase.
On a pro forma basis for the year ended December 31, 1997, Westar
Energy's revenues would have been approximately $2.1 billion and its debt $2.7
billion ($1.9 billion from Western Resources and $800 million from KCPL). With
$8.2 billion in combined assets, Westar Energy will serve more than 1 million
electric customers in Kansas and Missouri. The combined entity will have more
than 8,000 megawatts of electric generation resources.
DIVIDEND POLICY
KCPL currently pays an annual dividend of $1.62 per KCPL share. Western
Resources has an indicated annual dividend of $2.14 per Western Resources share.
In addition, it is presently the intention of Westar Energy to pay annual
dividends at a target rate consistent with the dividend payout ratios of other
pure-play utilities, or approximately 72 cents per Westar Energy share the first
full year of operation. It is anticipated that after completion of the
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transaction, KCPL shareowners will receive dividends on both the Western
Resources shares and the Westar Energy shares exchanged for their KCPL shares.
Based on these assumptions and Western Resources stock price and
dividend rates, KCPL shareowners would thus receive stock which is anticipated
to pay a combined dividend of $1.90 for each KCPL share exchanged at the
closing. Of course, there can be no assurance that the boards of the directors
of either Western Resources or Westar Energy will declare dividends in the
future or, if declared, the amount of such dividends.
MANAGEMENT AND BOARD
John E. Hayes, Jr., will become chairman of the board of Westar Energy
and Drue Jennings will become chief executive officer. The board of directors of
Westar Energy will consist of 10 members, including six directors appointed by
Western Resources and four directors from KCPL. In addition, three KCPL
directors will join Western Resources' board.
HEADQUARTERS
Westar Energy will do business in its various service areas under the
names KCPL, KGE, and KPL. The corporate headquarters of Westar Energy will be in
Kansas City, Missouri. Its customer service operations will be headquartered in
Wichita, Kansas, and its field operations will be located in Topeka, Kansas.
COLLAR
The number of shares to be received by KCPL shareowners in the exchange
will be equal to $23.50 in value provided that the average closing price of
Western Resources stock over the 20-day trading period ending 10 days prior to
closing is not greater than $47.00 or less than $38.28 (the collar). If the
stock price is above or below this range, the collar has additional steps above
and below which are outlined in detail in the amended merger agreement, which
has been set forth on a Form 8-K to be filed with the Securities and Exchange
Commission.
APPROVALS AND TIMING
The transaction is conditioned, among other things, upon the approval
of each company's shareowners at meetings to be conducted around June 30, 1998.
Other approvals include various state and federal regulatory agencies,
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including the Kansas Corporation Commission, the Missouri Public Service
Commission, the Federal Energy Regulatory Commission, and the Nuclear Regulatory
Commission. The companies are hopeful that regulatory approvals can be obtained
by mid-1999.
Salomon Smith Barney is serving as financial advisor and Sullivan &
Cromwell is serving as legal advisor to Western Resources. Merrill Lynch & Co.
is serving as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is
serving as legal advisor to KCPL.
HOW THE TRANSACTION LOOKS
PRE-TRANSACTION:
______________________ ___________
| | | KCPL |
| WR | |(Regulated |
| (KPL) | | Utility) |
|______________________| |___________|
| | |
| | |
| | |
| | |
______|______ _____|_____ ______|____
| Unregulated | | | | |
| Businesses | | KGE | | KLT Inc. |
|_____________| |___________| |___________|
POST-TRANSACTION:
------------------- ---------------
| WR | | KCPL |
| Shareholders | | Shareholders |
------------------- ---------------
| | |
| 34.5%(a) | |
| 65.5% | |
| | |
______|_______ | |
| |____________________________| |
| WR |______________ | 19.9%
|______________| | |
| | | |
| | | |
| | 100% |80.1% |
_______________| | | |
_________|_________ ___|_________ | _________|_______
|Monitored Security | | | | | |
| Gas | | KLT Inc. | | | Westar Energy |
|Other Businesses | |_____________| |_______| KCPL, KGE, KPL |
|___________________| |_________________|
(a) Based on 65.4mm WR shares, 61.9mm KCPL shares, a 0.555 exchange ratio, and a
$42.31 WR 03/13/98 closing stock price.
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