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Hawaiian Electric Industries (HE) Board Approves Spin of ASB Hawaii

December 3, 2014 5:02 PM EST

Hawaiian Electric Industries (NYSE: HE) announced that its Board of Directors has unanimously approved a plan to spin off ASB Hawaii, Inc., the parent company for American Savings Bank, and establish it as an independent publicly traded company. The spinoff of ASB Hawaii is contingent upon the closure of the separately announced definitive agreement under which NextEra Energy, Inc. will combine with HEI and will occur immediately prior to the closing of the NextEra Energy-HEI transaction.

American Savings Bank is one of Hawaii's largest full-service financial institutions with over $5 billion in assets1, more than $4 billion in deposits, 56 branches and 1,200 employees. It currently operates as a subsidiary of HEI. The spinoff transaction is not expected to result in significant changes to American Savings Bank's operations.

"Our ability to establish American Savings Bank as a new, independent public company reflects the strength of the bank's business, its strong market position and its talented team of employees," said Connie Lau, chairman of the board for American Savings Bank and president and chief executive officer of HEI. "This plan also enables HEI shareholders to participate in the upside potential of American Savings Bank following the spinoff. We are confident that American Savings Bank is well positioned to thrive into the future."

"For nearly 90 years, American Savings Bank has been dedicated to serving and investing in Hawaii and its people. This mission will continue to guide us," said Rich Wacker, president and chief executive officer of American Savings Bank. "As an independent public company, American Savings Bank will continue to benefit from our experienced management team and a highly motivated team of employees, as well as its history of high performance, conservative risk management, and solid profitability."

Following the spinoff, American Savings Bank will remain based in Hawaii and continue to provide a full range of financial products and services, including business and consumer banking, insurance and investments, corporate banking and commercial real estate lending. American Savings Bank will maintain its name and corporate identity.

American Savings Bank has been named a "Best Place to Work in Hawaii" for five consecutive years and has also been recognized as one of the state's healthiest employers. In addition, American Savings Bank has been recognized as one of the "Best Banks to Work for" by American Banker Magazine for two years in a row since the inception of the ranking.

Terms and Timing of ASB Hawaii Spinoff

Under the planned spinoff, HEI shareholders would receive a distribution of stock in ASB Hawaii, pro rata to their ownership interest in HEI. NextEra Energy will assume the corporate tax liability related to the spinoff (estimated to total approximately $1.60 per HEI share). The spinoff is expected to be tax-free for HEI shareholders. In addition, ASB Hawaii's tax basis in its assets is expected to be increased to reflect their fair market value at the time of the spinoff, which is expected to create a deductible amortization of an intangible asset for tax purposes and a corresponding deferred tax asset (DTA) for generally accepted accounting principles purposes, improving regulatory capital ratios and providing improved cash flow by reducing cash taxes as the DTA is amortized. Based on the median of six equity analyst consensus estimates, on Dec. 2, 2014, ASB Hawaii's estimated current value is approximately $800 million, or approximately $8.00 per share. This valuation represents 1.7-1.8x tangible book value for ASB Hawaii. Following the spinoff, American Savings Bank expects to realize higher year-over-year fee income due to regaining its exemption from regulatory limits on interchange fees (Durbin Amendment). Prior to losing the Durbin Amendment exemption in 2013, American Savings Bank realized approximately $6 million, after tax, in higher interchange fees.

The spinoff separation is expected to be completed immediately prior to and is contingent upon the completion of the combination of HEI and NextEra Energy, which is expected to occur within approximately 12 months, and remains subject to HEI shareholder and regulatory approvals. The spinoff is also subject to customary conditions and final approval by the HEI board of directors.

Advisors

J.P. Morgan Securities LLC is serving as financial advisor to HEI, and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel.

Citigroup Global Markets Inc. is serving as financial advisor to NextEra Energy, and Wachtell, Lipton, Rosen & Katz is legal counsel.



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