The sale of Philadelphia Gas Works (PGW), the nation’s largest municipally owned utility, by the City of Philadelphia was no ordinary merger and acquisition deal. Thirty-three potential bidders expressed interest in PGW, and Ballard Spahr partner Gregory L. Seltzer, who led the legal team representing the City, said the political aspects of the deal made it particularly complicated.

Mayor Michael Nutter had to consider not only price and risk exposure, but also the ability to get City Council to approve the deal. The $1.86 billion agreement to sell PGW to UIL Holdings Corporation requires the approval of both City Council and the Pennsylvania Public Utility Commission before the deal can close.

The initial group of 33 bidders was winnowed down by the city’s financial advisers to 15, based on the advisers’ assessment of which ones had the financial wherewithal and the operational background to run a utility, Mr. Seltzer said. Five ultimately submitted final bids. They were not only required to submit their final price, but also a comprehensive markup of a purchase agreement.

“I didn’t want to be negotiating key contract terms after we got a price and a buyer got a sense they were out in front in terms of prices,” Mr. Seltzer said. “Then we took the last three or four weeks to use the competitive tension and the desire for this asset against the bidders. We pit them against themselves and negotiated.” 

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