Puget Energy regulatory headwinds 'typical,' analyst says; GE Healthcare acquires Vital Signs

By Paul A. Harris

St. Louis, July 24 - Puget Energy Holding (NYSE: PSD) shares closed at $26.80 on Thursday, down 1.29%, or $0.35 as investor worries continued about whether the sale of the company will go through in light of regulatory opposition.

In recent news, the company, investors and key regulators filed a key settlement agreement in the $30 per share $7.4 billion bid for the utility by a consortium of investors led by Australia's Macquarie Infrastructure Partners.

However the chief of Washington state's public counsel section asserts that his office's key concerns about the company's contemplated debt level, in the deal, remain unresolved.

A stock analyst who covers Puget Energy, and who spoke on background Thursday, said the 10%-plus spread would be approximately 5% tighter absent the attorney general's concerns.

But, the analyst added, the fact that the Washington Utilities and Transportation Commission signed the agreement "is pretty important.

Settlement with regulators

On Wednesday Puget Sound Energy, the utility subsidiary of Puget Energy, a consortium of long-term infrastructure investors, the staff of the Utilities and Transportation Commission, the Industrial Customers of Northwest Utilities, Northwest Industrial Gas Users, the Energy Project, the Northwest Energy Coalition, and Kroger Co. filed a settlement stipulation with the commission outlining the terms of their settlement agreement in the merger.

The commitments addressed the level of debt to be incurred in the acquisition, the bond ratings of Puget Sound Energy, dividend restrictions, the ability of Puget Sound Energy to finance its capital expenditures, programs for low income customers, and renewable energy and energy efficiency.

The Utilities and Transportation Commission staff's agreement with the settlement and recommendation that the commission approve the settlement is not binding on the three-member panel of commissioners. The commissioners must still review and issue a final decision on the merger request.

Meanwhile on Wednesday Simon ffitch, chief of the Washington state's attorney general's Public Counsel, told the Seattle Times that the buyers "have not been able to resolve our key concerns about the level of debt being added to Puget's financial structure and the risk that creates for the company and its customers."

Typical headwinds

On Thursday the stock analyst who covers Puget Energy characterized the regulatory headwinds which the deal is faces as "pretty typical."

As to the timeline of the deal, the analyst said that the Sept. 2 request date for the final order of the Utilities and Transportation Commission, which is not a binding deadline on the commission, will possibly come and go without the deal being finalized.

"There may be an order by then, but I'm not sure a deal can close by then," the analyst said.

"There are still some more filings, including Hart-Scott-Rodino, and Council on Foreign Investment in the U.S."

Iberdrola chairman expects favorable ruling

There was also news regarding a New York State regulated utility, Energy East Corp., which is being acquired for $28.50 per share by Spain's Iberdrola SA.

In a Thursday email message a special situations equities analyst said that during a morning earnings call Iberdrola chairman Ignacio Sanchez Galan reiterated his belief that the New York Public Service Commission will rule in favor of the merger.

However, Sanchez Galan cautioned, if the wind energy plans are capped by the commission, Iberdrola will terminate the agreement.

Shares of Energy East (NYSE: EAS) ended the Thursday session 0.36% lower at $24.80 per share, down nine cents.

Iberdrola (Frankfurt Stock Exchange: IDRO)'s shares closed 2.63% lower at €8.14, down €0.22

GE Healthcare to acquire Vital Signs

Apart from the utility sector, GE Healthcare, a unit of General Electric Co., announced that will acquire Vital Signs, Inc. for $74.50 per share in cash in a transaction that values Vital Signs at approximately $860 million, net of Vital Signs cash and investments as of March 31, 2008.

The boards of both companies have approved the deal which is expected to Vital Signs' shareholder and regulatory approvals.

Shareholders holding approximately 37% of Vital Signs' outstanding common stock have agreed, among other things, to vote their shares in favor of the proposed transaction.

Vital Signs provides medical products applicable to care areas including anesthesia, respiratory, sleep therapy and emergency medicine.

Its shares (Nasdaq: VITL) gained 26.05%, of $15.11, to close Thursday at $73.11.

Meanwhile shares of General Electric (NYSE: GE) ended 2.11% lower, giving up $0.62 per share to close at $28.71.

Thursday's situations took place against a backdrop of retreating prices on all three major U.S. stock exchanges.

The Dow Jones Industrial Average sustained the deepest loss, 2.43% or 283.1 points, to close at 11,349.28.

The S&P 500 dropped by 2.31% or 29.65 points, ending at 1,252.54.

The Nasdaq declined by 1.97% to end the day at 2,280.11, 45.77 lower.

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