Kaiser Ventures Agrees to Sell Water Company Stock For $87.5 Million
Kaiser Ventures Inc. has announced that it had reached an agreement for the sale of all of its stock in Fontana Union Water Company, a mutual water company, to the Cucamonga County Water District (the "District") for $87.5 million in cash. Closing on the sale is currently anticipated to take place in January 2001. Kaiser will also receive approximately $2.5 million in lease payments from the District between now and closing. The sale will also resolve the ongoing rate dispute litigation between the District and Kaiser. The Board of Directors of the District and Kaiser has each approved the transaction, which remains subject to approval by the shareholders of Kaiser and other closing contingencies.
In 1989, the District and Kaiser entered into a 102-year take or pay lease under which the District leased Kaisers shares in Fontana Union Water Company at a rate indexed to the rate charged for water by the Metropolitan Water District of Southern California. The lease transaction still stands as one of the largest private water transactions in Southern California. In 2000, Kaiser acquired an additional 3% ownership interest in Fontana Union, which is also included in the sale transaction.
Richard Stoddard, Kaisers Chief Executive Officer and Chairman of the Board of Directors stated, "Kaiser has struggled with the idea of selling the water company asset because of the quality of the water lease backed by the District and its steady cash payments, but we determined that it was an appropriate time to sell." Mr. Stoddard continued, "For its part, the District is to be applauded for its vision in securing a permanent, high quality important local water source to serve its customers in one of the fastest growing areas of Southern California."
Kaiser is also engaged in selling several of its smaller assets, including its Lake Tamarisk properties for $1.75 million in cash and its Silver Lake Mine and miscellaneous mining properties for a total of $2 million in cash and a note. The sale of the Lake Tamarisk properties is currently in escrow and the terms of a definitive purchase agreement for the Silver Lake and miscellaneous mining properties are currently being negotiated. Each transaction is scheduled to close in the first quarter of 2001, but are subject to many conditions, including each buyers due diligence, which could delay or even prevent closing.
With regard to the pending sale of the Eagle Mountain landfill project to the Los Angeles Sanitation District (the "Sanitation District"), the Sanitation District is continuing its due diligence which is currently scheduled to be completed early in the first quarter of 2001. However, on November 6, 2000, the Ninth Circuit Court of Appeals issued a decision which reversed the completed federal land exchange for the competing Mesquite Sanitary Landfill rail-haul project. The Court of Appeals, among other things, concluded that the appraisal used in that land exchange was defective because it failed to take into consideration the potential that the land being acquired would be used as a landfill. Opponents to the Eagle Mountain Project can be expected to assert that this decision requires a reversal of the land exchange at Eagle Mountain. The Company is in the preliminary stages of evaluating the decision and its relevance to the Eagle Mountain project, given the similarities and the differences between Eagle Mountain and Mesquite. The possibility that the courts might ultimately decide that the Eagle Mountain land exchange should be reversed could adversely affect the Eagle Mountain project as well as its pending sale.