After just six months on its own, parent UtiliCorp United is rolling back up its recent IPO of unregulated utility Aquila Inc. , which has an active producer finance business. UtiliCorp, which still holds 80% of the spin-off, is offering stock in exchange for the shares of Aquila it sold in April. "Selling high and buying low, particularly when you sell for money and buy for paper, sounds great to me," says one E&P executive. "The Aquila shareholders may look at it differently, but they are probably happy they are not Enron shareholders." UtiliCorp presold 17.5 million shares of Aquila at $24 a share, in a hugely successful offering. The stock opened at $29.75 and briefly was as high as $35. UtiliCorp is now offering 0.6896 share of UtiliCorp, in a tax-free exchange, per share of Aquila. Based on the closing price of UtiliCorp, the deal is worth about $19.14 per Aquila share. Gross proceeds in April totaled $420 million; the buyout was worth approximately $335 million at press time. Gordon Howald, utilities analyst for Credit Lyonnais Securities (USA) Inc. , is disappointed in UtiliCorp's offer but adds that "management may have felt obligated to take a bold step, given the recent [Aquila] share-price weakness." Enron's problems-the company is being sold to Dynegy for approximately 10% of its March 2001 stock value-have exemplified the potential challenges and difficulties that marketing and trading companies are now having. The buy-out is premature, Howald believes. "While market sentiment, again stemming primarily from the Enron situation,...did put undue pressure on the shares, we believe the strong fundamentals demonstrated at Aquila would have eventually resulted in a more appropriate valuation for the shares." Aquila could not pursue its acquisition plans, while its equity currency is not highly valued by the stock market and as debt markets have tightened recently. Howald believes acquisitions will be possible, under UtiliCorp, though.

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