American Water Works, the company that took over the operations of Buffalo's water system in 1997, agreed today to be acquired by RWE AG, Europe's No. 4 power company, for $7.6 billion in cash and assumed debt.
American Water Works, the biggest publicly traded U.S. water utility, will add more than 10 million U.S. customers to RWE's water unit and further reduce its reliance on the German electricity market, while also helping it catch up with larger rivals.
RWE is offering $46 in cash per share, 35 percent more than last Monday's close, for the Vorhees, N.J.-based company. Germany's RWE will assume $3 billion of American Water's debt, said Chief Financial Officer Klaus Sturany on a conference call.
"RWE has said it wants to expand in water, and this is another step in that direction," said Ulf Moritzen, who helps manage 100 million euros ($93 million) at Nordinvest. "In the current situation, it makes sense to buy a defensive business."
The planned purchase isn't cheap. Including debt, RWE will pay about 5.4 times sales for the U.S. company, compared with 4.9 times sales for Thames Water. In the U.S., buyers paid about 4 times sales for the 15-plus takeovers in the country's water industry over the past two years, according to Bloomberg data.
The deal will require approval from shareholders, as well as the consent of regulators in the 21 states in which American Water Works has operations. That process could take more than 18 months, said Thomas Hamlin, an analyst at First Union Securities.
Business inventories decline
WASHINGTON (AP) -- Businesses showed progress whittling inventories of unsold goods in July, marking the sixth month in a row that inventories have declined. Sales posted a solid increase.
The Commerce Department reported today that supplies on shelves and backlots fell by a seasonally adjusted 0.4 percent in July, following an even bigger 0.6 percent drop the month before.
At the same time, businesses' sales advanced by 0.4 percent, after having plunged by 1.5 percent in June.
The economic slowdown, which started in the second half of last year, has curbed Americans' appetite for goods, causing an inventory pileup. To reduce inventories, companies have laid off workers, reduced shifts and deeply discounted merchandise.
Las Vegas project postponed
LAS VEGAS (Bloomberg) -- Park Place Entertainment Corp., the largest casino company, said it's postponing construction of a $475 million hotel tower at Caesars Palace in Las Vegas because of last week's terrorist attacks.
Park Place will continue building the Colosseum, a 4,000-seat arena that will cost $75 million, the company said in a release.
Park Place cited Tuesday's terrorist attacks on the World Trade Center and Pentagon, as well as a slowing economy that had hurt demand before the attacks, as reasons for the postponement. The company's second-quarter earnings fell 17 percent as lower winnings hurt profits at its casinos.
Regulators to audit Duke Power
COLUMBIA, S.C. (AP) -- Regulators have ordered an audit of Duke Power's financial statements to determine whether the company underreported income to avoid cutting rates for 2 million customers in North Carolina and South Carolina, The State reported Sunday.
Internal company documents obtained by the newspaper indicate that top executives discussed underreporting income as early as December 1998, the newspaper said. The documents discussed how Duke Power could avoid exceeding its "allowed return."
The allowed return, set by state regulators, determines how much Duke Power can charge its customers. Should it exceed that return, it could have to cut rates for its customers.
The State obtained the documents from a Duke accountant who asked not to be identified. The accountant previously told South Carolina regulators about the possible underreporting of income.
A Duke Power spokesman denied any deliberate wrongdoing.
Kaiser keeps smelters idle
SPOKANE, Wash. (AP) -- Kaiser Aluminum Corp. announced it will keep its Northwest smelters idle at least through October because of poor prices for its metal.
Kaiser officials had hoped to restart the aluminum-making pot lines at smelters here and in Tacoma after new federal power contracts take effect Oct. 1.
This week in business . . .
These are the major business and economic events scheduled for this week.
Tuesday -- Labor Department reports on consumer price index for August.
Wednesday -- Commerce Department reports on international trade for July. Federal Reserve releases the beige book, its survey of regional economic conditions.
Thursday -- Labor Department reports on weekly jobless claims. Commerce Department reports on housing starts for August.
Friday -- Treasury Department reports on federal budget for August.