Hawaiian Electric Industries recessed a special meeting of shareholders Tuesday morning after the votes in favor of the proposed merger with Florida-based NextEra Energy fell short of the number required  for approval.

Company chairman Jeff Watanabe took the podium a half-hour after the meeting’s scheduled start and quickly got to the point.

While 90 percent of shareholders who voted as of Tuesday morning favored the merger, they represented only about 70 percent of all company shares outstanding. 

This was short of the 75 percent required by state law to be voted in favor before the merger can move forward.

Hawaiian Electric Iwilei station.  11 march 2015. photograph Cory Lum/Civil Beat

Hawaiian Electric’s Iwilei station.

Cory Lum/Civil Beat

During the meeting, Watanabe said 26.6 million shares had not yet been voted. However, in a press release after the meeting was recessed, the company lowered that estimate to 23.7 million, representing approximately 22 percent of total shares outstanding.

If shareholders fail to vote, their shares will be counted as “no” votes, opposing the merger. The $4.3 billion deal awaits more than just the shareholder vote. The state Public Utilities Commission is currently reviewing the proposal and could ultimately approve it, approve it with changes, or reject it as not in the interest of consumers.

When the deal was first made public in December 2014, the company’s share price jumped from about $27 to just over $33 per share, reflecting the estimated value of the merger. However, in recent weeks, the company’s stock value has lagged, and closed today at $30.85 per share.

Shareholders authorized the company to recess the Tueday meeting to seek additional votes. It will be reconvened in Honolulu on June 10.

About 150 shareholders attended the meeting, along with a number of company employees.

Following the meeting, Watanabe described the company’s shareholders. Just over half of all shares are owned by institutional investors such as mutual funds, pension plans and banks. The other half are held by individual investors, and only about half of those live in Hawaii, he said.

Watanabe said that while the company has made special efforts to solicit support for the NextEra deal, many shares are held by brokers on behalf of individual shareholders.

The company doesn’t know the identities of these shareholders, and has to work through the brokers to get information to the individual owners.

Watanabe acknowledged this will make rounding up the remaining votes a challenge for the company.

When the deal was first made public in December 2014, the company’s share price jumped from about $27 to just over $33 per share, reflecting the estimated value of the merger. However, in recent weeks, the company’s stock value has lagged, and closed today at $30.85 per share.

The Zacks investment service downgraded Hawaiian Electric’s stock to a “sell” recommendation Tuesday, citing recent declines in revenues and profits of the company’s utility business. The move follows a recent downgrade by Barclays, which may be taking into account the possibility the deal might not be approved.

According to the merger agreement with NextEra, Hawaiian Electric would have to pay a $90 million penalty if it backs out of the merger. However, Watanabe said the penalty would only be triggered if the company tried to merge with a different corporate suitor, or decided to back out of the merger and continue as an independent company.

It would not have to pay the penalty if shareholders do not approve the merger, or if the Public Utilities Commission fails to give its approval.

About the Author

  • Ian Lind
    Ian Lind is an award-winning investigative reporter and columnist who has been blogging daily for 15 years. He has also worked as a newsletter publisher, public interest advocate and lobbyist for Common Cause in Hawaii, peace educator, and legislative staffer. Lind is a lifelong resident of the islands. Read his blog here. Opinions are the author's own and do not necessarily reflect Civil Beat's views.