ALLETE, Inc., announced today that its Board of Directors has approved a plan to spin-off its automotive services business, which will become a publicly traded company to be named ADESA Corporation. The spin-off is expected to take the form of a tax-free stock dividend to ALLETE's shareholders who will receive one ADESA share for each share of ALLETE stock they own. ALLETE has not yet finalized details of the spin-off.
The Board's decision was made after a lengthy review of strategic alternatives and reflects ALLETE's intention to create long-term shareholder value. To prepare for the spin-off and its operation as a stand-alone entity, ALLETE's automotive services business will immediately begin refinancing its debt.
ALLETE believes that this spin-off will better facilitate the strategic objectives of both businesses. With its strong cash flow, the company believes that ADESA Corporation will be better positioned to pursue growth opportunities as a stand-alone company and will appeal to a broader group of institutional investors. For ALLETE, the company believes the split will create a simplified regulatory and risk profile and a more stable credit rating, enhancing its ability to pursue strategic growth initiatives.
ALLETE Automotive Services, the company that will become ADESA Corporation, had 2002 revenue of $844 million. Its ADESA wholesale auctions is a leader in the industry, growing from the initial 12 auctions ALLETE purchased in 1995 into a network of 53 wholesale vehicle auctions, 28 salvage auctions, and 82 Automotive Finance Corporation offices, that span the United States and Canada. Automotive Finance Corporation is the largest provider of floor planning for independent car dealers in North America; ADESA Impact is the Company's salvage auction business. ADESA is based in Indianapolis, Indiana, with plans to move into a new headquarters building in Carmel, Indiana in spring 2004.
After the spin-off, ALLETE will be comprised of Minnesota Power and ALLETE Properties, Inc. ALLETE's headquarters will remain in Duluth. In 2002, Minnesota Power and ALLETE's Investments business (including ALLETE Properties, Inc.) generated revenue of approximately $663 million.
The Board, in consultation with its financial and legal advisors, is working on the details that need to be finalized to accomplish ADESA's refinancing and the spin-off. The spin-off is subject to the approval of ALLETE's Board of Directors of the final plan, favorable market conditions, receipt of tax opinions, satisfaction of U.S. Securities and Exchange Commission (SEC) requirements, and other customary conditions, and is expected to occur in mid-2004.