Filed Pursuant to Rule 424(b)5
Registration Statement No. 333-57104,
333-57104-01 and 333-57104-02
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 28, 2001)
--------------------------------------------------------------------------------
6,500,000 Shares
[ALLETE LOGO]
COMMON STOCK
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Outstanding shares of common stock, without par value, together with attached
preferred share purchase rights (collectively "common stock") of ALLETE, Inc.
are, and the shares of common stock offered hereby ("Offered Stock") will be,
listed on the New York Stock Exchange (Symbol: ALE). The last reported sale
price of the common stock on the New York Stock Exchange composite tape on May
23, 2001 was $23.68 per share.
The underwriters have a 30-day option to purchase a maximum of 975,000
additional shares to cover over-allotments of shares.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds to
Price to discounts and ALLETE (before
Public commissions expenses)
------------------------------------------------------ ------------ -------------- ---------------
Per Share $23.68 $0.9472 $22.7328
------------------------------------------------------ ------------ -------------- ---------------
Total $153,920,000 $6,156,800 $147,763,200
------------------------------------------------------ ------------ -------------- ---------------
Total Assuming Full Exercise of Over-Allotment Option $177,008,000 $7,080,320 $169,927,680
------------------------------------------------------ ------------ -------------- ---------------
ALLETE currently expects to deliver the Offered Stock to the underwriters in New
York City on or about May 30, 2001
UBS Warburg
Robert W. Baird & Co. Janney Montgomery Scott LLC
Prospectus Supplement dated May 24, 2001.
[ALLETE LOGO]
[GRAPH DEPICTING ASSETS BY BUSINESS SEGMENT AS OF MARCH 31, 2001]
[MAP DEPICTING LOCATION OF ALLETE OPERATIONS AS OF APRIL 30, 2001]
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN
THIS PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING PROSPECTUS. NEITHER ALLETE NOR
ANY UNDERWRITER HAS AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION,
YOU SHOULD NOT RELY ON IT. NEITHER ALLETE NOR ANY UNDERWRITER IS MAKING AN OFFER
OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR IN THE
ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THOSE DOCUMENTS.
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TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement.............................................S-4
Summary .....................................................................S-4
The Offering.................................................................S-4
ALLETE.......................................................................S-4
Selected Financial Information...............................................S-8
Capitalization...............................................................S-9
Use of Proceeds..............................................................S-9
Dividends and Price Range....................................................S-9
Underwriting................................................................S-10
Legal Opinions..............................................................S-12
PROSPECTUS
About this Prospectus..........................................................2
Where You Can Find More Information............................................2
Incorporation by Reference.....................................................2
Safe Harbor Statement Under the Private Securities Litigation Reform
Act of 1995..................................................................3
ALLETE.........................................................................4
ALLETE Capital II and ALLETE Capital III.......................................6
Use of Proceeds................................................................6
Consolidated Ratios of Earnings to Fixed Charges and Ratios of Earnings to
Fixed Charges and Preferred Dividends........................................7
Description of Common Stock....................................................7
Description of First Mortgage Bonds...........................................11
Description of Debt Securities................................................15
Description of Preferred Trust Securities and Common Trust Securities.........23
Description of the Guarantee..................................................30
Description of Junior Subordinated Debentures.................................33
Plan of Distribution..........................................................42
Experts.......................................................................43
Legal Opinions................................................................44
S-3
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first is this prospectus supplement,
which describes the specific terms of this common stock offering. The second
part, the accompanying prospectus, gives more general information, some of which
may not apply to this offering.
If the description of the offering varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.
This prospectus supplement contains forward looking statements. For a
description of these statements and a discussion of the factors that may cause
our actual results to differ materially from these statements see "Safe Harbor
Statement Under the Private Securities Litigation Reform Act of 1995" in the
accompanying prospectus.
SUMMARY
This summary highlights information appearing elsewhere or incorporated by
reference in this prospectus supplement and the accompanying prospectus. This
summary is not complete and does not contain all of the information that you
should consider before purchasing the Offered Stock. Unless the context requires
otherwise, references to "we", "us" or "our" refer collectively to ALLETE and
its subsidiaries.
THE OFFERING
Securities offered by ALLETE.................. 6,500,000 shares of common stock,
without par value, together
with attached preferred share
purchase rights.
Indicated current annual dividend rate........ $1.07 per share
1999-2001 price range (through May 23, 2001).. $26.13 - $14.75 (adjusted to
reflect a 2:1 stock split on
March 3, 1999)
Shares outstanding at April 30, 2001.......... 75,685,479
Listed........................................ New York Stock Exchange (Symbol:
ALE)
Use of proceeds............................... Net proceeds will be used to
repay outstanding commercial
paper and for general corporate
purposes.
ALLETE
The information in this section replaces in its entirety the information in
the "ALLETE" section beginning on page 5 of the accompanying prospectus.
ALLETE has been incorporated under the laws of the State of Minnesota since
1906. Before September 1, 2000 ALLETE did business under the name Minnesota
Power, Inc. On May 8, 2001, ALLETE legally changed its name from Minnesota
Power, Inc. to ALLETE, Inc. ALLETE is a multi-services company and has 13,800
employees in 43 states and nine Canadian provinces engaged in its four business
segments:
(1) Energy Services, which include electric and gas services, coal mining
and telecommunications;
(2) Automotive Services, which include a network of vehicle auctions, a
finance company and several subsidiaries that are integral parts of
the vehicle redistribution business;
(3) Water Services, which include water and wastewater services; and
S-4
(4) Investments, which include real estate operations, investments in
emerging technologies related to the electric utility industry and a
securities portfolio.
ENERGY SERVICES
The Energy Services segment, which includes Minnesota Power, primarily
generates, transmits, distributes, markets and trades electricity. In addition,
Energy Services include coal mining and telecommunications in and near Minnesota
Power's electric utility service area. As of March 31, 2001, Minnesota Power
supplied retail electric service to 130,000 customers in northeastern Minnesota.
Superior Water, Light and Power Company, a wholly owned subsidiary, provided
electric, natural gas, and water services to 14,000 electric customers, 12,000
natural gas customers and 10,000 water customers in northwestern Wisconsin as of
March 31, 2001. Split Rock Energy LLC, formed as an alliance between Minnesota
Power and Great River Energy, combines power supply capabilities and customer
loads to share market and supply risks and to optimize power trading
opportunities. Split Rock contracts for exclusive services from MPEX, Minnesota
Power's power marketing division.
BNI Coal, Ltd., another wholly owned subsidiary, owns and operates a
lignite mine in North Dakota. Two electric generating cooperatives, Minnkota
Power Cooperative, Inc. and Square Butte Electric Cooperative, presently consume
virtually all of BNI Coal's production of lignite coal under cost-plus coal
supply agreements expiring in 2027. Under an agreement with Square Butte,
Minnesota Power purchases approximately 71 percent of the output from the Square
Butte unit which is capable of generating up to 455 megawatts. Minnkota Power
has an option to extend its coal supply agreement to 2042.
Other subsidiaries within the Energy Services business segment include:
o Electric Outlet, Inc., doing business as Electric Odyssey, which is a
retail, catalog and e-commerce merchandiser that sells unique products
for the home, office and travel;
o Minnesota Power Telecom, Inc., which provides high reliability fiber
optic-based communication and advanced data services to businesses and
communities in Minnesota and Wisconsin; and
o Rainy River Energy Corporation, which is engaged in wholesale power
marketing.
Minnesota Power has large power contracts to sell power to 12 industrial
customers, each requiring 10 megawatts or more of generating capacity. These
contracts require the payment of minimum monthly demand charges that cover the
fixed costs associated with having capacity available to serve each of these
customers, including a return on common equity. Each contract continues past the
contract termination date unless the required four-year advance notice of
cancellation has been given.
AUTOMOTIVE SERVICES
Automotive Services include several subsidiaries which are integral parts
of the vehicle redistribution business.
ADESA Corporation, a wholly owned subsidiary, is the second largest vehicle
auction network in North America. Headquartered in Indianapolis, Indiana, ADESA
owns, or leases, and operates 54 vehicle auction facilities in the United States
and Canada through which used cars and other vehicles are sold to franchised
automobile dealers and licensed used car dealers. Sellers at ADESA's auctions
include domestic and foreign auto manufacturers, car dealers, automobile
fleet/lease companies, banks and finance companies. ADESA also owns 21 vehicle
auctions in the United States and Canada that provide "total loss" vehicle
recovery services to insurance companies.
Automotive Finance Corporation, another wholly owned subsidiary, provides
inventory financing for wholesale and retail automobile dealers who purchase
vehicles from ADESA auctions, independent auctions, other auction chains and
other outside sources.
S-5
Other subsidiaries within the Automotive Services business segment include:
o Great Rigs Incorporated, which is one of the nation's largest
independent used automobile transport carriers with more than 140
automotive carriers, the majority of which are leased;
o PAR, Inc., doing business as PAR North America, which provides
customized vehicle remarketing services to various customers such as
banks, captive finance, commercial fleets and rental car dealers in
the United States and Canada;
o AutoVIN, Inc., 90 percent owned, which provides professional field
information service to the automotive industry and the industry's
secured lenders. Services provided include vehicle condition
reporting, inventory verification auditing, program compliance
auditing and facility inspection; and
o ADESA Importation Services, Inc., which is the second largest
independent commercial registered importer of vehicles in the United
States.
WATER SERVICES
Water Services include Florida Water Services Corporation, Heater
Utilities, Inc., Georgia Water Services Corporation, Instrumentation Services,
Inc. and Americas' Water Service Corporation, each a wholly owned subsidiary.
Florida Water, the largest investor owned water supplier in Florida, owns and
operates water and wastewater treatment facilities within that state. As of
March 31, 2001, Florida Water served 153,000 water customers and 74,000
wastewater customers, and maintained 157 water and wastewater facilities
throughout Florida. As of March 31, 2001, Heater Utilities, which provides water
and wastewater treatment services in North Carolina, served 44,000 water
customers and 5,000 wastewater treatment customers. Georgia Water provides
wastewater treatment services to 1,000 customers near Atlanta, Georgia.
Instrumentation Services provides predictive maintenance and instrumentation
consulting services to water and wastewater utilities in the southeastern United
States as well as Texas and Minnesota. Americas' Water Services offers contract
management, operations and maintenance services for water and wastewater
treatment facilities to governments and industries.
INVESTMENTS
Investments consist of real estate operations, investments in emerging
technologies related to the electric utility industry and an actively traded
securities portfolio. Through subsidiaries, ALLETE owns Florida real estate
operations at Cape Coral and Lehigh Acres adjacent to Fort Myers, at Palm Coast
in northeast Florida and at Sugarmill Woods in Citrus County. Since 1985, ALLETE
has invested $39.3 million in start-up companies that are developing
technologies that may be used by the electric utility industry. As of March 31,
2001, ALLETE's trading and available-for-sale securities portfolio had a fair
value of approximately $118.4 million.
OUTLOOK
Corporate
We expect to continue to focus on attaining our strategic objectives of
substantially growing earnings, achieving market leadership in each of our
businesses, significantly enhancing total shareholder return with the objective
of increasing our market capitalization to over $4 billion by 2005 and achieving
market recognition as a multi-services company. We plan to achieve these goals
through selective acquisitions and internal growth while maintaining our credit
and security ratings within our businesses. Our $438 million investment in new
vehicle auction facilities during 2000, followed by our $62.4 million investment
in auction facilities that provide "total loss" vehicle recovery services in
January 2001, are consistent with our growth strategy. These investments are
expected to contribute to our goal of 12% earnings growth in 2001.
S-6
Energy Services
Energy Services continues to be a strong cash flow generator for us. Our
access to and ownership of low-cost power are the greatest strengths of Energy
Services and we will continue to look for opportunities to add to our low-cost
energy portfolio. We have more than adequate generation to serve our customer
base. Energy in excess of our customers' requirements is marketed through MPEX,
a division of Minnesota Power, and Split Rock Energy LLC.
Energy Services continues to pursue plans to construct in partnership with
Wisconsin Public Service Corporation a 250-mile, 345-kilovolt transmission line
from Wausau, Wisconsin to Duluth, Minnesota and pursue regional wholesale
merchant generating plant opportunities. Energy Services intends to seek
additional cost savings alternatives and efficiencies, and expand its
non-regulated services to maintain its contribution to overall net income.
Automotive Services
We anticipate earnings from Automotive Services to increase by more than
40% in 2001. This earnings growth includes a 10% to 15% increase in earnings
before interest, taxes, depreciation, amortization and lease expense from same
store ADESA auction facilities.
Vehicle sales within the auto auction industry are expected to rise at a
rate of 2% to 4% annually over the next several years. With the continuing
popularity of leasing and the high cost of new vehicles, a steady flow of
vehicles is expected to return to auction. Automotive Services also expects to
participate in the industry's growth through selective acquisitions and expanded
services. We will continue to look for accretive acquisitions in the wholesale
vehicle and "total loss" recovery auction businesses.
ADESA and Automotive Finance Corporation continue to focus on growth in the
volume of vehicles sold and financed, increased ancillary services, and
operating and technological efficiencies. Great Rigs Incorporated, PAR, Inc. and
ADESA Importation Services, Inc. plan to participate in the growth of auction
volume and enhance market share.
Water Services
Florida Water will continue to grow by selectively acquiring targeted water
systems. The strategic emphasis at Heater is growth in North Carolina. Both
Florida Water and Heater operate in states that are currently experiencing rapid
population growth, which should result in expected annual customer growth of 4%
to 7% over the next two years.
Investments
Over the last five years, sales by real estate operations have been on
average three to four times more than the acquisition cost of property sold,
creating strong cash generation and profitability. From time to time, our real
estate operations may acquire large residential community properties at low
cost, add value and sell them at current market prices in order to continue a
consistent earnings contribution from this business.
Our investments in emerging technology funds make capital available to
companies developing products and services critical to the future of the
electric utility industry. With many of these funds maturing, our investments
may add to income in the future. Our securities portfolio will continue to
concentrate in market-neutral investment strategies designed to provide stable
and acceptable returns without sacrificing needed liquidity.
S-7
SELECTED FINANCIAL INFORMATION
You should read the following table in conjunction with the financial
statements and notes incorporated by reference into this prospectus supplement
and the accompanying prospectus.
Three Months
Ended March 31, Year Ended December 31,
--------------- -----------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
(millions of dollars, except per share amounts)
Diluted Earnings Per Share of Common Stock
Before Capital Re and ACE Transactions..... $ 0.46 $ 0.43 $ 1.67 $ 1.49 $ 1.35
Capital Re and ACE Transactions (a)........ - - 0.44 (0.52) -
-------- -------- -------- -------- --------
Total.................................... $ 0.46 $ 0.43 $ 2.11 $ 0.97 $ 1.35
======== ======== ======== ======== ========
Operating Revenue
Energy Services............................ $ 159.4 $ 141.6 $ 589.5 $ 554.5 $ 559.8
Automotive Services........................ 211.1 119.5 546.4 406.6 328.4
Water Services............................. 29.5 28.0 118.6 112.9 95.6
Investments................................ 13.0 33.5 77.4 57.8 55.5
-------- -------- -------- -------- --------
$ 413.0 $ 322.6 $1,331.9 $1,131.8 $1,039.3
======== ======== ======== ======== ========
EBITDAL (b)
Energy Services............................ $ 37.4 $ 35.3 $ 143.7 $ 145.1 $ 150.5
Automotive Services........................ 57.8 34.4 154.0 114.6 86.9
Water Services............................. 12.0 10.7 47.8 44.7 34.7
Investments................................ 8.7 18.6 45.0 34.5 33.3
Corporate Charges.......................... (4.5) (4.4) (16.5) (14.8) (15.5)
-------- -------- -------- -------- --------
$ 111.4 $ 94.6 $ 374.0 $ 324.1 $ 289.9
======== ======== ======== ======== ========
Net Income
Energy Services............................ $ 11.9 $ 10.7 $ 43.1 $ 45.0 $ 47.4
Automotive Services........................ 17.7 11.9 48.5 39.9 25.5
Water Services............................. 3.1 2.4 13.1 12.2 7.5
Investments................................ 5.5 11.5 29.3 26.8 29.6
Corporate Charges.......................... (5.3) (6.1) (15.8) (19.7) (21.5)
-------- -------- -------- -------- --------
Net income before Capital Re and ACE
Transactions............................ 32.9 30.4 118.2 104.2 88.5
Capital Re and ACE Transactions (a)........ - - 30.4 (36.2) -
-------- -------- -------- -------- --------
$ 32.9 $ 30.4 $ 148.6 $ 68.0 $ 88.5
======== ======== ======== ======== ========
Selected Balance Sheet Data
Total assets............................... $3,097.5 $2,534.2 $2,914.0 $2,312.6 $2,208.9
Capitalization
Stockholders' equity..................... $ 917.5 $ 856.7 $ 900.8 $ 817.3 $ 797.1
Mandatorily redeemable preferred
securities of ALLETE Capital I.......... $ 75.0 $ 75.0 $ 75.0 $ 75.0 $ 75.0
Redeemable preferred stock............... - $ 10.0 - $ 20.0 $ 20.0
Long-term debt........................... $1,069.5 $ 708.9 $ 952.3 $ 712.8 $ 672.2
------------------------
(a) In May 2000 ALLETE sold its investment in ACE Limited ("ACE") common stock,
which resulted in an after-tax gain of $30.4 million, or $0.44 per share.
The ACE shares were received in December 1999 upon completion of ACE's
merger with Capital Re Corporation ("Capital Re"). During 1999 ALLETE
recorded an aggregate $36.2 million, or $0.52 per share, after-tax non-cash
charge in connection with the valuation and exchange of its investment in
Capital Re stock for the ACE shares.
(b) EBITDAL is defined as earnings before interest, taxes, depreciation,
amortization and lease expense. EBITDAL is not a measure of performance
under U.S. generally accepted accounting principles ("GAAP"). While EBITDAL
should not be considered as a substitute for net income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with GAAP, or as a measure of profitability or liquidity,
management understands that EBITDAL is customarily used as a measure in
evaluating companies.
S-8
CAPITALIZATION
The following table summarizes the capitalization of ALLETE at March 31,
2001 and its capitalization as adjusted to reflect the issuance and sale of
6,500,000 shares of common stock (assuming no exercise of the underwriters'
over-allotment option) contemplated by this prospectus supplement and the
application of the net proceeds in the manner described in "Use of Proceeds."
As of March 31, 2001
-------------------------
Actual Adjusted
--------- --------------
(millions of dollars, except percentages)
CAPITALIZATION
Stockholders' equity..................................... $ 917.5 $1,065.3 48.21%
ALLETE obligated mandatorily redeemable preferred
securities of subsidiary ALLETE Capital I which holds
solely ALLETE Junior Subordinated Debentures............ 75.0 75.0 3.39%
Long-term debt........................................... 1,069.5 1,069.5 48.40%
-------- -------- -------
Total capitalization (excluding current maturities)........ $2,062.0 $2,209.8 100.00%
======== ======== =======
USE OF PROCEEDS
The information in this section adds to the information in the "Use of
Proceeds" section beginning on page 7 of the accompanying prospectus. Please
read these two sections together.
ALLETE will add the net proceeds from the sale of the Offered Stock to its
general funds. ALLETE expects to use its general funds to repay a portion of
ALLETE's short-term borrowings. On May 23, 2001, ALLETE had an aggregate of
approximately $269 million of short-term borrowings outstanding, which had
maturities of up to 22 days and which had a weighted average annual interest
rate of 4.79%. ALLETE will invest general funds not immediately used for this
purpose or other purposes in short-term instruments.
DIVIDENDS AND PRICE RANGE
The following table sets forth the high and low sales prices per share of
the common stock reported on the New York Stock Exchange composite tape and the
dividends paid for the indicated periods.
Price Range
----------- Dividends
High Low Per Share
---- --- ---------
1999 First Quarter......................... $22.09 $19.53 $0.2675
Second Quarter........................ 21.81 18.94 0.2675
Third Quarter......................... 19.88 16.56 0.2675
Fourth Quarter........................ 18.69 16.00 0.2675
2000 First Quarter......................... 18.06 14.75 0.2675
Second Quarter........................ 20.75 16.00 0.2675
Third Quarter......................... 24.25 17.31 0.2675
Fourth Quarter........................ 25.50 20.13 0.2675
2001 First Quarter......................... 26.00 20.19 0.2675
Second Quarter (through May 23, 2001). 26.13 23.10 -
On April 18, 2001, a quarterly dividend of $.2675 per share was declared
payable June 1, 2001 to shareholders of record on May 15, 2001. Holders of the
Offered Stock will not be entitled to this dividend.
The above stock prices are adjusted to reflect a 2:1 stock split of
ALLETE's common stock on March 3, 1999.
S-9
The last reported sale price of the common stock on the New York Stock
Exchange composite tape on May 23, 2001 was $23.68 per share.
ALLETE has paid dividends without interruption on its common stock since
1948, the date of initial distribution of the common stock by American Power &
Light Company, the former holder of all such stock.
ALLETE has a direct stock purchase and dividend reinvestment plan ("Invest
Direct"). Invest Direct provides investors with a convenient method of acquiring
shares of common stock through (i) the reinvestment in common stock of all or a
portion of the cash dividends payable on an investor's holdings of common stock,
and/or (ii) the investment of optional cash payments pursuant to the terms of
Invest Direct. ALLETE reserves the right to suspend, modify, amend or terminate
Invest Direct at any time and to interpret and regulate Invest Direct as it
deems necessary or desirable in connection with operation of Invest Direct.
Shares of common stock are offered for sale under Invest Direct only by means of
a separate prospectus available upon request from ALLETE.
UNDERWRITING
ALLETE is selling the common stock to the underwriters named in the table
below pursuant to an underwriting agreement dated the date of this prospectus
supplement. ALLETE has agreed to sell to each of the underwriters, and each of
the underwriters has severally agreed to purchase, the number of shares of
common stock set forth opposite that underwriter's name in the table below:
Underwriters Number of Shares
------------ ----------------
UBS Warburg LLC.................................................. 3,565,000
Robert W. Baird & Co. Incorporated............................... 1,200,000
Janney Montgomery Scott LLC...................................... 1,200,000
ABN AMRO Rothschild LLC.......................................... 75,000
A.G. Edwards & Sons, Inc......................................... 75,000
Dain Rauscher Incorporated....................................... 75,000
SunTrust Equitable Securities Corporation........................ 75,000
U.S. Bancorp Piper Jaffray Inc................................... 75,000
Ladenburg Thalmann & Co. Inc..................................... 32,000
NatCity Investments, Inc......................................... 32,000
Tucker Anthony Incorporated...................................... 32,000
C.E. Unterberg, Towbin........................................... 32,000
Wells Fargo Investments, LLC..................................... 32,000
---------
Total.......................................................... 6,500,000
=========
Under the terms and conditions of the underwriting agreement, the
underwriters must buy all of the shares of Offered Stock if they buy any of
them. The underwriting agreement provides that the obligations of the
underwriters pursuant thereto are subject to approval of legal matters by their
counsel, including the validity of the Offered Stock, and other conditions, such
as the receipt by the underwriters of officer's certificates and legal opinions.
If an underwriter defaults, the underwriting agreement provides that, in certain
circumstances, the purchase commitments of the non-defaulting underwriters may
be increased or the underwriting agreement may be terminated. The underwriters
will sell the Offered Stock to the public when and if the underwriters buy the
Offered Stock from ALLETE.
S-10
ALLETE has granted to the underwriters an option to purchase up to 975,000
additional shares of common stock at the public offering price, less the
underwriting discounts and commissions, set forth on the cover page of this
prospectus supplement to cover over-allotments, if any. This option is
exercisable for a period of 30 days. If the underwriters exercise their
over-allotment option, the underwriters have severally agreed, subject to
conditions, to purchase shares in approximately the same proportion as set forth
in the table above.
The underwriters propose to offer the common stock directly to the public
initially at the offering price set forth on the cover page of this prospectus
supplement. The underwriters may offer the common stock to securities dealers at
that price less a concession not in excess of $0.56 per share. Securities
dealers may reallow a concession not in excess of $0.10 per share on sales to
certain other brokers or dealers. The underwriters reserve the right to reject
any order for the purchase of shares. If all of the shares are not sold at the
public offering price, the underwriters may change the offering price and other
selling terms.
ALLETE, and each of the directors and executive officers of ALLETE, will
agree with the underwriters not to sell, offer to sell, hypothecate, grant any
option to sell, contract to sell, hedge or otherwise dispose of, directly or
indirectly, any common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of this prospectus
supplement continuing through the date 90 days after the date of this prospectus
supplement, without the prior written consent of UBS Warburg LLC, except
issuances of equity-based awards pursuant to ALLETE's director or employee
incentive plans, issuances pursuant to the exercise of outstanding stock options
and issuances under Invest Direct.
The following table provides information regarding the per share and total
underwriting discounts and commissions ALLETE will pay to the underwriters.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase up to 975,000 additional shares.
Paid By ALLETE
-----------------------------------------------
No Exercise of Full Exercise of
Over-Allotment Option Over-Allotment Option
Per Share......................... $0.9472 $0.9472
Total........................... $6,156,800 $7,080,320
ALLETE estimates that its expenses in connection with the sale of the
Offered Stock, other than underwriting discounts, will be $350,000. This
estimate includes expenses related to the filing fee for the registration
statement, printing, transfer agent fees and legal fees, among other expenses.
The underwriting agreement provides that ALLETE will indemnify the
underwriters against, or contribute to payments the underwriters may be required
to make in respect of, certain liabilities, including liabilities under the
Securities Act of 1933.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M of the Securities Exchange Act of 1934. Over-allotment
transactions involve syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying securities so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of the
common stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the underwriters
to reclaim a selling concession from a syndicate member when the common stock
originally sold by such syndicate member is purchased in a stabilizing
transaction or syndicate covering transaction to cover syndicate short
positions. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. Neither ALLETE nor any
underwriter is making any representation or prediction as to the effect that the
transactions described above may have on the price of the common stock. These
transactions may be effected on the New York Stock Exchange or otherwise and, if
commenced, may be discontinued at any time.
S-11
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, ALLETE and its affiliates in the ordinary course
of business and have engaged, and may in the future engage, in commercial
banking and investment banking transactions with ALLETE and its affiliates.
LEGAL OPINIONS
The legality of the Offered Stock will be passed upon for ALLETE by Philip
R. Halverson, Esq., Duluth, Minnesota, Vice President, General Counsel and
Secretary for ALLETE, and by Thelen Reid & Priest LLP, New York, New York,
counsel for ALLETE, and for the underwriters by Morrison Cohen Singer &
Weinstein, LLP. Thelen Reid & Priest LLP and Morrison Cohen Singer & Weinstein,
LLP may rely as to all matters of Minnesota law upon the opinion of Mr.
Halverson.
S-12
[ALLETE LOGO]