Duluth-based Allete to be sold, go private for $6.2 billion

The sale price was announced at $6.2 billion, or $67 per share. The stock had been priced at $64.47 before trading opened Monday and closed at $63.01.

The sale comes months after speculation first surfaced on Wall Street that Allete officials had been searching for a suitor.

Allete officials said the company, which would go from publicly traded to a privately owned firm, will remain headquartered in Duluth, retain its workforce, and honor all union contracts and labor agreements. Allete CEO Bethany Owen will also remain at the helm.

In an interview with the News Tribune on Monday, Owen said taking the company private would help it access "capital ready to deploy" for nearly $4 billion in clean energy and infrastructure projects planned over the next five years. She noted it takes time to raise capital in the public markets, which are volatile.

"We're looking to double the size of Allete over the next five years," Owen said. "And when you think about that amount of capital that we needed to have access to, we wanted to make sure that we had ready access to that. And these partners, they're incredibly well-resourced, very well-respected. They're not operators — they're truly investors — and they provide us that access to capital that we need to execute our strategy."

The CPP Investments is a professional investment management organization that manages a fund for the more than 22 million contributors and beneficiaries of the Canada Pension Plan. It has more than $590 billion (Canadian) in assets.

New York City-based GIP is among the world's largest infrastructure investors, with approximately $112 billion in assets under management, annual revenues of approximately $73 billion, and over 115,000 employees.

In January, BlackRock, the world's largest asset manager, agreed to buy GIP for $12.5 billion, Reuters reported. The deal is expected to close in the third quarter of 2024, BlackRock said at the time.

"We don't believe it will mean anything for our transaction," Owen told the News Tribune, noting it's a separate transaction.

Allete's board of directors unanimously approved CPP Investments' and GIP's acquisition of Allete, which is expected to close in mid-2025. However, it is subject to approval by Allete shareholders and regulatory agencies, including the Federal Energy Regulatory Commission and Minnesota Public Utilities Commission, as well as other customary financial closing conditions.

The Minnesota Power and Superior, Water, Light and Power subsidiaries of Allete would remain regulated utilities in Minnesota and Wisconsin. In addition to the two local utilities, Allete also owns several wind-generating, hydropower-generating, electrical transmission lines and other energy assets. The company has focused in recent years on transitioning away from coal-fired power plants to a mix of hydro, wind, solar and gas-power electrical generation.

Steve Kuchera / File / Duluth Media Group

"Our 'Sustainability-in-Action' strategy has secured Allete's place as a clean-energy leader," Owen said in a news release Monday morning. "Through this transaction with CPP Investments and GIP, we will have access to the capital we need while keeping our customers, communities and co-workers at the forefront of all that we do, with continuity of our day-to-day operations, strategy and shared purpose and values."

In a research note to investors Monday, Wells Fargo analyst Sarah Akers wrote that the deal is "likely to close" and that the $67 per share price is "reasonable."

Akers wrote that Allete's "robust renewable" and transmission and distribution growth opportunities were attractive, but noted "elevated economic exposure (industrial customer base) and non-utility risks/challenges present challenges to the valuation."

The Financial Times, which first reported on the possibility of Allete's sale Friday, cited two anonymous sources familiar with the transaction. It reported that "bankers led an extended process to find a buyer for Allete" as some potential buyers were put off by returns from a regulated utility and others were concerned about "the group's concentrated customer base of mining operations and paper pulp mills industries that face uncertain futures because of technological change."

In 2022, the mining industry consumed 58% of Minnesota Power's retail energy, while paper and pulp used 8%, and pipeline and other industrial customers used 7%, according to the company.

Owen denied Minnesota Power's industrial base gave any potential buyers pause or caused any to back off from a deal. Owen said CPP Investments and GIP share Allete's goal of clean, reliable and affordable energy.

"CPP Investments and GIP have a successful track record of long-term partnerships with infrastructure businesses, and they recognize the important role our Allete companies serve in our communities as well as our nation's energy future," Allete said in its news release. "Together, we will continue to invest in the clean-energy transition and build on our 100 plus-year history of providing safe, reliable, affordable energy to our customers."

In the news release with Allete, GIP Chairman and CEO Bayo Ogunlesi said his company looks forward to providing "Allete with additional capital so they can continue to decarbonize their business to benefit the customers and communities they serve."

"Bringing together Allete, with its demonstrated commitment to clean energy, with GIP, one of the world's premier developers of renewable power, furthers our commitment to serve growing market needs for affordable, carbon-free and more secure sources of energy," Ogunlesi said.

News Tribune reporter John Myers contributed to this report.

This story was updated several times with updated stock price information, quotes from Allete CEO Bethany Owen and information from a Wells Fargo research note, the Financial Times and Reuters. The final version was published at 5:34 p.m. It was originally posted at 7:36 a.m. May 6.

This story was updated at 8 a.m. May 6 to correct the price in the headline and 3:32 p.m. to correct Allete CEO Bethany Owen's last name. The News Tribune regrets the errors.