HPUC Deal Rejection Means American Savings Bank Spinoff Is Scrapped

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After years of deliberations and studies, Hawaii’s Public Utilities Commission (the ‘HPUC’) recently ruled against NextEra’s (NEE) proposed takeover of local utility Hawaiian Electric (HE). The commission concluded that NextEra ‘failed to prove its plans for HECO would be good for the state’ and it wasn’t convinced it would ultimately benefit Hawaii’s consumers. A big sticking point appeared to be commitment to the State’s 100% Renewables goal. Although the decision was supposed to be non-partisan, it appears the process was heavily steeped in politics with the state’s Governor publicly opposing the deal. In fact, he controversially appointed a like minded commissioner to the panel right before the vote, a decision which you can imagine upset a number of people. For those interested in an insider’s perspective, here is a nice blog by a former HPUC commissioner which offers a series of takes on the decision (who wouldn’t want to read about the ins and outs of Hawaii’s energy policy?).

Not surprisingly, the two companies terminated the transaction the Monday after the decision. Given the political headwinds, the PUC’s decision wasn’t a total shock and in fact, the deal mostly traded with a rather wide spread implying a good chance of a breakup. This isn’t a merger arb blog, but a consequence of the deal being called off is that the spinoff of HE’s American Savings Bank of Hawaii is now off. Yes, the utility also owned the third largest thrift bank in Hawaii. Clark Street discussed the situation in more detail, but basically the utility’s ability to own a bank was grandfathered in and that exception would have fallen away with the takeover. Thus a spin is born. Given its nature, many were interested in this spinoff and thought there could be value in this odd, unrelated asset being set free.

Alas, another spin bites the dust, but given the disparate nature of the business, perhaps this one might resurface in the future at the behest of management…or a loud investor?

Disclosure: Author holds no position in any stock mentioned.