ALLETE plans to separate its energy and automotive
businesses
Shareholders
to receive one share of ADESA Corp. for every share of ALLETE they
own
ALLETE shareholders will
receive one new share of ADESA Corp. stock in the form of a tax-free
stock dividend for each share of ALLETE stock they own as part
of a spin-off plan approved by the board of directors and announced
Oct. 24.
A new publicly traded company to be named
ADESA Corp. will result from the stock spin-off. The Board decided
to separate the businesses after a lengthy review of strategic
alternatives. Spinning off ADESA Corp. reflects ALLETE’s
intention to create long-term shareholder value.
Spin-off expected in mid-2004
To prepare for the spin-off and its operation
as a stand-alone entity, ALLETE’s automotive services business
will begin refinancing its debt. ALLETE has not yet finalized
details of the spin-off, which is projected to occur in mid-2004.
During an analyst’s conference call
Oct. 24, David Gartzke, ALLETE President, Chairman and CEO,
said he expects to become CEO of ADESA Corp. when the company
is spun off from ALLETE.
“This is the culmination of our strategy
to create long-term value for the corporation,” Gartzke
said of the spin-off. “ALLETE and ADESA are two very distinct
businesses and the Company believes that this spin-off will
better facilitate the strategic objectives of both businesses.”
ADESA will be better positioned to pursue growth
opportunities as a stand-alone company, Gartzke said, and will
appeal to a broader group of institutional investors. The spin-off
will create a simplified regulatory and risk profile and a more
stable credit rating for ALLETE, he said, enhancing its ability
to pursue strategic growth initiatives.
Since the beginning of the year, ALLETE’s board carefully
weighed a number of alternatives to optimize ALLETE’s
long-term value for shareholders.
“These companies have very different characteristics
and capital requirements,” Gartzke said. “As two
separate companies, we believe ALLETE and ADESA will offer investors
the opportunity to target their investments more specifically.
Each company will have its own distinct path for growth.”
From 12 to 53 auto auctions
ALLETE Automotive Services, the company which
will become ADESA Corporation, had 2002 revenue of $844 million.
Its ADESA wholesale auctions is a leader in the industry, growing
from the initial 12 auctions ALLETE purchased in 1995 into a network
of 53 wholesale vehicle auctions, 28 total loss vehicle auctions,
and 82 AFC loan production offices that span the United States
and Canada. AFC is the largest provider of floorplanning for independent
car dealers in North America; ADESA Impact is the Company’s
salvage auction business. ADESA, based in Indianapolis, Ind.,
is making plans to move into a new headquarters building in Carmel,
Ind., in the spring of 2004.
After the spin-off, ALLETE will be comprised
of Minnesota Power, ALLETE Properties, Inc., Superior Water,
Light and Power, BNI Coal, Rainy River Energy and Enventis Telecom.
ALLETE’s headquarters will remain in Duluth, Minn.
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Dear
Shareholder |
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 Our decision to separate
ALLETE, Inc. into two independent, publicly traded companies
is both a beginning and an end. It is the start of a process
that will lead to a brand new entity, ADESA Corp., which
will come out of the blocks with a solid market presence
and a phenomenal record of growth. The decision to spin
off ADESA Corp. is the culmination of our strategy to create
long-term value for investors.
Our automotive segment has been the growth
engine of this corporation ever since we purchased ADESA
for $167 million in 1995. Today, Automotive Services has
more than $1.7 billion in assets and contributes more
than 60 percent of ALLETE’s earnings.
After the companies separate, Minnesota
Power will be the largest component of ALLETE. I expect
Minnesota Power to continue its tradition of providing
affordable and reliable energy to customers large and
small. It will be better able to pursue its own growth
initiatives and thrive as a successful energy company.
We have largely accomplished what we set
out to do two years ago. We exited non-essential businesses.
Approximately 90 percent of our Florida Water Services
subsidiary is either sold or under contract to be sold.
This leaves us with two businesses, one focused on automotive
services and the other involved with energy. Now the time
has come to separate them, and we are working out the
best way to do that.
Once the two businesses are separate publicly-traded
entities, investors will more clearly understand the strengths
each one brings to the marketplace. We’ll keep you
informed as more details about this separation are finalized.
Sincerely,
David G. Garzke
Chairman, President and Chief Executive Officer |
In 2002, Minnesota Power and ALLETE’s
Investments business (which includes ALLETE Properties, Inc.)
generated revenue of approximately $663 million. ALLETE Properties
owns Florida real estate operations in six different locations.
After the spin-off,
ADESA will be independent from ALLETE,
with its own management and board
A stock dividend
ALLETE shareholders will
receive a stock dividend of one share of ADESA stock for every
share of ALLETE that they own. Gartzke said he expects the new
ADESA Corp. to pay “a modest dividend.” Once the spin-off
is complete, ADESA Corp. will be independent from ALLETE, with
its own management team and board of directors focused on the
automotive remarketing business.
As an independent publicly traded company,
ADESA Corp. will have its own common stock and will be subject
to regulation by the U.S. Securities and Exchange Commission
(SEC) and its financial reporting requirements.
Details being
worked out
ALLETE’s board, in consultation with its
financial and legal advisors, is working on details that need
to be finalized to accomplish ADESA’s refinancing and the
spin-off. The spin-off is subject to final approval by ALLETE’s
board, favorable market conditions, receipt of tax opinions, satisfaction
of SEC requirements and other customary conditions.
UBS Warburg and Merrill Lynch & Co.,
Inc. are advising ALLETE on financial matters related to the
spin-off. Two firms — Skadden, Arps, Slate, Meagher &
Flom LLP, and Kaplan, Strangis and Kaplan, P.A., — are
serving as legal counsel to ALLETE.
Specific information concerning the transaction
is limited by SEC regulations. The Company noted that additional
details will be forthcoming.
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 ENERGY
Services |
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MP's Pat Mullen joined Jill Abelson, EPA communication manager,
in Duluth in October to help celebrate the success of the
national Change-A-Light/Change the World program in Minnesota
Power's service territory.EPA salutes Minnesota Power for its role
in the
"Change-A-Light"
compact fluorescent lamp campaign
A top U.S. Environmental Protection Agency
official visited Duluth in October to help celebrate the
exceptional success of the national Change-A-Light/Change
the World program in the Minnesota Power service territory
and to launch the 2003 campaign.
The EPA’s Jill Abelson, communication
manager, joined two of the retailers in the Minnesota Power
service territory, who in the fall of 2002 participated
in the sale of almost 285,000 energy-saving compact fluorescent
lamps (CFLS) for a public observance hosted by Minnesota
Power. More than 80 retailers and wholesalers sold nearly
half a million CFLS in the utility’s service territory.
Abelson praised the retailers for their
efforts and applauded Minnesota Power for its strong marketing
campaign to make the public aware of the energy-saving lamps.
Pat Mullen, Minnesota Power vice president of customer service,
attributed the success to the utility’s strong relationship
with retailers. He also spoke about how the campaign dovetailed
with the state of Minnesota’s Conservation Improvement
Program.
Change-A-Light is part of the national
Energy Star program jointly sponsored by the EPA and U.S.
Department of Energy. It encourages consumers to replace
their standard lightbulbs with lamps that qualify for the
Energy Star because of their efficiency.
In the Minnesota Power service territory
last fall, instant cash rebates from the utility dropped
the price of the bulbs, usually selling for from $7 to $12
each, to a dollar. Energy Star qualified fixtures and bulbs
last six to 10 times longer than standard models and operate
on two-thirds less energy. In addition, they generate about
70 percent less heat than standard incandescent lighting.
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AUTOMOTIVE
Services |
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Cheryl Munce
Cheryl Munce named ADESA Impact president
Cheryl Munce has been named president of
ADESA Impact, ALLETE’s total loss vehicle remarketing
company based in Indianapolis. Munce will continue as president
of ADESA Impact’s sister company in Canada, Impact Canada.
Munce, 45, joined Impact Canada in 1996
as director of business development. Since then, the business
has expanded significantly and is now the leading provider
of total loss management services in Canada. Combined with
its total loss vehicle auctions in the United States, ADESA
Impact today operates 28 total loss recovery auctions in North
America.
“Impact is in a prime position to be able
to compete in this business,” Munce said. “Impact’s
people have many years of industry knowledge and experience,
and we’re famous for innovation and customer service.”
Munce said Impact has developed a unique business model that
enables Impact to break into markets through existing ADESA
whole-car facilities while keeping the need for capital to
a minimum.
“Now, with our North American alignment,
we are able to assist our clients with their cross-border
losses and utilize existing infrastructure,” Munce said.
“This will make us more competitive.”
Munce is a 20-year veteran of the automotive
industry and spent 13 years in the insurance services business.
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The
statements contained in this newsletter and statements that
ALLETE may make orally in connection with this newsletter
that are not historical facts, are forward-looking statements.
Actual results may differ materially from those projected
in the forward-looking statements. These forward-looking statements
involve risks and uncertainties and investors are directed
to the risks discussed in documents filed by ALLETE with the
Securities and Exchange Commission. |
Shareholder Services ALLETE • 30 West Superior Street • Duluth, MN 55802-2093
• 218-723-3974 or 1-800-535-3056
E-mail: shareholder@allete.com |
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