Board chairman
David Gartzke brought shareholders up to date on the status
of the proposed separation of ADESA, Inc. from ALLETE. He
told the audience that there were two basic questions he wanted
to cover: 1. why we decided to separate, and 2. how the separation
impacts shareholders.
Gartzke recalled the 2003 annual meeting,
when he raised the question of whether the automotive components
of ALLETE (including ADESA auto auctions, Automotive Finance
Corp. and ADESA Impact salvage auctions) still fit with
the remainder of the corporation (including Minnesota Power,
ALLETE Properties, BNI Coal and Enventis Telecom).
“After deliberate and careful analysis
we decided they don’t fit together,” Gartzke
said. Both are large and strong enough to stand alone, he
said, and as separate companies, ALLETE and ADESA would
be better able to pursue independent strategies.
He explained the separation transaction
in three parts – ALLETE as it exists today, the initial
public offering (IPO), and the spin-off.
1. Today
Today, ALLETE shareholders
own stock in a company recently valued at from $30 to $35 per
share, with an annual dividend of $1.13 per share. Currently,
ADESA earnings make up about 60 percent of total earnings.
2. Initial Public
Offering (IPO)
During the second quarter
of this year, approximately $150 million worth of ADESA stock
will be sold to the market in an IPO. This ADESA stock will
be traded on the New York Stock Exchange under the ticker symbol
KAR, and its price will be set by the market. Proceeds raised
through the IPO and the issuance of debt will be used to recapitalize
the business and to pay a $100 million dividend to ALLETE. The
IPO will give shareholders a good idea of the market value of
ADESA and will spur coverage of the new stock by financial analysts.
There will be no change to current shareholders in their ownership
of ALLETE shares or the dividend associated with ALLETE.
3. Spin-off
Expected to occur during
the third quarter of 2004, the spin-off will mark the separation
of ALLETE and ADESA into two publicly traded companies. ALLETE
shareholders will receive a share of KAR for every share of
ALLETE they own. As Gartzke explained to shareholders at the
meeting, “you will still own ALLETE and ADESA, but in
two separate securities.” KAR will pay a dividend of
30 cents per share. A new dividend for ALLETE will be set
by the board of directors, but the total of the ALLETE and
ADESA dividends is expected to be less than the current $1.13,
Gartzke said. He told shareholders that they could manage
their income from the two securities by “altering the
mix.” To do this, they could sell some or all of their
shares in one company and invest the proceeds in the other.
Gartzke closed his presentation to shareholders
with a display demonstrating the long-term value of an ALLETE
investment. If a person had invested $1,000 in ALE n 1980,
that investment would be worth $43,865 today, he said.
top
One
of the eleven directors elected, Roger D. Peirce, is new to the
ALLETE board. Pierce, 66, of Mequon, Wis., has been a corporate
consultant since his 1994 retirement from Super Steel Products
Corp., where he served as chief executive officer and vice chairman
of the board. Pierce was president and CEO of Valuation Research
Corp. in 1995 and 1996, and worked for 25 years as an accountant
with Arthur Anderson. 
