Exhibit 99.2
Unlocking Shareholder Value
March 30, 2000
Western Resources
[LOGO] Western Resources
Disclaimer
The exchange offer of Westar Capital shares for Western Resources shares has not
yet commenced. This presentation does not constitute an offer to sell or
exchange any securities. Any offer will be made pursuant to a registration
statement and a tender offer statement to be filed with the Securities and
Exchange Commission. Western Resources shareholders are urged to read the
registration statement, and the tender offer statement when they are available
because they will contain important information relating to the offer. A
prospectus relating to the offer will be disseminated to all Western Resources
shareholders. Shareholders will also be able to obtain the registration
statement, the tender offer statement and other filed documents for free at the
Internet website maintained by the Securities and Exchange Commission at
http://www.sec.gov. In addition, Western Resources will make the filed documents
- -------------------
available for free to Western Resources shareholders.
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Unlocking Shareholder Value
o Significant trading discount exists in Western Resources' stock
o Discount likely to persist
- Protection One Earnings continue to depress consolidated EPS
- Continuing holding company discount
o Separation of the Utility (Westar Energy) and non-electric utility assets
(Westar Capital) will allow the market to more accurately value these separate
companies
o Following proposed transaction, goal is to maintain investment grade senior
secured credit rating
2
Unlocking Shareholder Value
o Western Resources will be split into two publicly traded entities through a
non pro rata exchange offer
- Westar Energy - Pure play electric utility consisting of KPL and KGE
- Westar Capital - Consists of Protection One, ONEOK, Paradigm Direct,
Protection One Europe and other assets.
o Advantages
- Unlocks value by creating a pure play Electric Utility
- Allows investors to invest in Westar Capital, 2nd largest residential
provider of monitored security and 45% owner of ONEOK
3
Valuation Assumptions
o Exchange offer
- Split is expected to be achieved through a non pro rata exchange offer
- Up to approximately 37 million shares of Westar Capital will be offered to
the shareholders with a minimum of approximately 29 million shares
outstanding, subject to the terms in the final exchange offer. If the offer
is undersubscribed, Westar Energy will hold the shares below approximately
29 million for possible later distribution or sale.
- Partial disposition of Protection One through issuance of $15 million
preferred stock to third party
- Westar Energy issues approximately $300 million in equity, following close
of transaction
o Westar Energy grants Warrant to Westar Capital
- In conjunction with the exchange offer, Westar Capital receives warrant to
acquire 19.9% of the common stock of Westar Energy. The Warrant expires in
12 years. The exercise price will be equal to the estimated trading value of
Westar Energy at the time the exchange offer commences. The implied
valuation of the Warrant is $30 - $40 million.
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Key Execution Mechanics
Pre Separation Separation Post Separation
o Organization of Westar Capital o Westar Capital distributed to o Westar Capital
current Western Resources
o Partial disposition of Protection shareholders in exchange for WR - New company with Protection
One provides tax shelter shares One, ONEOK, Paradigm
Direct, Protection One
o Westar Energy grants Westar - Exchange is non-pro rata; Europe and Other
Capital Warrant to purchase shareholders choose whether Investments
Westar Energy shares post- to participate
separation o Westar Energy
- Shareholders likely will treat - Electric utility assets
receipt of Westar Capital
stock as capital gain or loss - Issuance of approximately
for tax purposes $300 million of equity
- EPS accretion for Utility
shareholders
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Current Western Resources Valuation
Value per
Western Resources WR Share (1)
- ----------------------------- ------------
Westar Energy (2) $26.06
ONEOK (3) 9.43
Protection One (3) 2.48
Protection One Europe (4) 3.33
Other Investments (5) 4.27
Debt (6) (16.27)
- ----------------------------- ------------
Value per WR Share $29.30
Current WR Stock Price (3) $16.75
Current Price Discount 42.83%
(1) Shares outstanding at Western Resources of 67.6 million.
(2) Calculated using earnings of $2.19 per share times S&P average multiple of
11.9.
(3) Market prices as of 3/24/00. ONEOK value includes $4.87 premium for
preferred shares.
(4) Cost basis of $225 million.
(5) Other Investments include marketable securities (net of tax), unregulated
generation, Paradigm and interest due from Protection One.
(6) Assumes $1.1 billion in debt.
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New Westar Energy Pro Forma Fact Sheet
Westar Energy (dollars in millions, except per share amount)
- --------------------------------------------------------------------------------
Electric Customers 628,000
Generation 12/31/99 5,458 MW
12/31/99 Assets $4,674
1999 Revenues $1,429
1999 EBITDA $501
Pro Forma 1999 Net Income to Common $85
Pro Forma 12/31/99 Debt $3,000
Anticipated Common Dividend per Share $1.20
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New Westar Energy -Pro Forma Valuation *
(dollars in millions, except per share amounts)
Assumes Minimum Assumes Maximum
Westar Energy Valuation Subscription Level Subscription Level
- ----------------------- ------------------ ------------------
1999 Pro Forma Net Income $147.00 $147.00
Interest on Unallocated Debt (1) ($54.45) ($54.45)
Other Pro Forma Adjustments ($8.05) ($8.05)
------------------ ------------------
Net Income $84.50 $84.50
Shares Outstanding - millions (2) 38.6 30.6
EPS $2.19 $2.76
================== ==================
Anticipated Dividend $1.20 $1.20
(1) Unallocated Debt of $1.1 billion.
(2) Minimum subscription assumes 38.6 million shares of Westar Energy and 29
million shares of Westar Capital. Maximum subscription assumes 30.6 million
shares of Westar Energy and 37 million shares of Westar Capital. Assumes 1:1
exchange ratio.
* Excludes issuance of approximately $300 million of equity.
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New Westar Energy -Pro-Forma Valuation *
Westar Energy Implied Stock Price (1)
-------------------------------------
Minimum Maximum
Subscription Subscription
Average Industry Multiples EPS of $2.19 EPS of $2.76
- --------------------------------------------- ---------------- ------------------
S&P Electric Index P/E 11.9 $26.05 $32.86
Dividend Yield 6.2% $19.35 $19.35
Everen Index P/E 12.7 $27.80 $35.07
Dividend Yield 5.8% $20.69 $20.69
Philadelphia Index P/E 13.0 $28.46 $35.90
Dividend Yield 5.9% $20.34 $20.34
- --------------------------------------------- ---------------- ------------------
P/E Average 12.5
Average Yield 6.0%
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Average Stock Price $23.78 $27.37
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(1) Based on 1999 Pro Forma Net Income for Westar Energy
* Excludes issuance of approximately $300 million of equity. Index averages as
of 3/24/00.
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Westar Capital Pro Forma Fact Sheet
(dollars in millions)
Assets (1) EBITDA (3)
---------- ----------
Protection One $167.7 $165.0
Protection One Europe $225.0 $42.7
---------- ----------
Total $392.7 $207.7
Assets (2) Net Income (4)
---------- ---------------
ONEOK $637.5 $37.6
Paradigm Direct 35.4 0.8
Unregulated Generation 84.7 6.3
Marketable Securities (net of tax) 111.8 9.8
Due from Protection One 56.9 2.8
Value of Warrant 35.0 -
---------- ---------------
Total $961.3 $57.3
(1) Protection One calculated using 3/24/00 market price. Protection One Europe
calculated using 3/1/00 purchase price.
(2) ONEOK calculated using 3/24/00 market price, includes $4.87 premium on
preferred shares. Paradigm, unregulated generation, amount due from Protection
One and marketable securities calculated using 12/31/99 book value. Warrant
valuation based upon binomial valuation method.
(3) EBITDA calculated using 1999 results.
(4) Net Income calculated using 1999 results.
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Westar Capital - Pro Forma Asset Valuation
(dollars in millions, except per share amounts)
Assumes Minimum Assumes Maximum
Westar Capital Valuation Subscription Level Subscription Level
- ------------------------ ------------------ ------------------
Protection One (1) $167.7 $167.7
ONEOK (1) 637.5 637.5
Unregulated Generation 84.7 84.7
Paradigm 35.4 35.4
Protection One Europe 225.0 225.0
Marketable Securities (net of tax) 111.8 111.8
Due from Protection One 56.9 56.9
Value of Warrant (2) 35.0 35.0
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Net Assets $1,354.0 $1,354.0
Shares Outstanding (3) 29.0 37.0
Theoretical Stock Price $46.69 $36.59
Holding Company Discount
- --------------------------------------------------------------------------------
30% $32.68 $25.62
- --------------------------------------------------------------------------------
40% $28.01 $21.96
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50% $23.34 $18.30
(1) Based on Market Prices as of 3/24/00. ONEOK value includes $4.87 premium for
preferred shares.
(2) Warrant valuation based upon binomial valuation method.
(3) Minimum subscription assumes 29 million shares of Westar Capital and 38.6
million shares of Westar Energy. Maximum subscription assumes 37 million shares
of Westar Capital and 30.6 million shares of Westar Energy.
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Forward-Looking Statements
Forward-Looking Statements: Certain matters discussed in this presentation are
"forward-looking statements." The Private Securities Litigation Reform Act of
1995 has established that these statements qualify for safe harbors from
liability. Forward-looking statements may include words like we "believe",
"anticipate," "expect" or words of similar meaning. Forward-looking statements
describe our future plans, objectives, expectations, or goals. Such statements
address future events and conditions concerning capital expenditures, earnings,
litigation, rate and other regulatory matters, achievement of anticipated cost
savings, possible corporate restructurings, mergers, acquisitions, dispositions,
liquidity and capital resources, interest and dividend rates, environmental
matters, changing weather, nuclear operations, ability to enter new markets
successfully and capitalize on growth opportunities in nonregulated businesses,
events in foreign markets in which investments have been made, and accounting
matters. Our actual results may differ materially from those discussed here. See
the company's and Protection One's 1999 Annual Reports on Form 10-K and
quarterly reports on Forms 10-Q and current reports on Form 8-K for further
discussion of factors affecting the company's and Protection One's performance.
Western Resources disclaims any obligation to update any forward-looking
statements as a result of developments occurring after the date of this
presentation.
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