TransAlta Corp. on Monday launched a hostile takeover bid of C$653.7 million (C$1.5 billion in enterprise value) for renewables giant Canadian Hydro Developers, offering shareholders C$4.55 per share in cash. The energy giant said that the move followed a seven-month failed effort to negotiate an acquisition transaction with Canadian Hydro.
TransAlta has 8,000 MW of installed capacity in Canada and the U.S.—62% of which is coal-fired. Canadian Hydro runs 694 MW of wind, hydro, and biomass facilities in Alberta, Ontario, Quebec, and British Columbia. It also has 252 MW of advanced-stage development projects in western and eastern Canada
TransAlta said in a press release on Monday that if the two companies were to merge, they would have a net generation capacity of 8,657 MW—with 22% coming from renewable resources. This would make the new firm the largest publicly traded provider of renewable energy in Canada.
“This offer provides Canadian Hydro Developers shareholders with significant, immediate and certain value for the company’s existing assets, as well as its future growth potential,” said Steve Snyder, TransAlta’s Chief Executive Officer. “We believe the combination of Canadian Hydro Developers’ portfolio and our operational and development capabilities and strong balance sheet, creates a company well-positioned to succeed in a world in which both capital and carbon are constrained.”
TransAlta said it first approached Canadian Hydro last December, when it had “clearly articulated its interest in combining the two companies and outlined the potential benefits of the transaction.” But, despite TransAlta’s efforts, “it became clear that a negotiated transaction could not be achieved,” it said. “As a result, TransAlta felt compelled to make this offer directly to Canadian Hydro Developers’ shareholders.”
The Canadian media pointed out the irony of TransAlta’s offer. Barely a year ago, the Calgary-based company had been the subject of a C$7.8 billion hostile takeover by one of its investors, LS Power Equity Partners, and another company, Global Infrastructure Power. The team had offered TransAlta’s shareholders C$39 per share. TransAlta had disparaged that offer as “far from premium.”
On Monday, Canadian Hydro CEO Kent Brown urged shareholders not to take any action until a special committee of independent directors had reviewed the takeover offer. “In consultation with its independent financial and legal advisors, the Special Committee will carefully review and evaluate the formal take-over offer when it is made by TransAlta, and will recommend to the Board the course of action that is in the best interests of Canadian Hydro and its shareholders.”
In a related story, Exelon on Tuesday announced that it is terminating its pending offer to acquire all of the outstanding shares of NRG Energy after NRG’s shareholders voted today against the offer.
NRG Energy has consistently maintained that the offer Exelon submitted last October significantly undervalues the company, and it has fought to thwart Exelon’s moves to gain approval of the bid by adding five people of its choosing to the NRG board.
Exelon Chairman and CEO John Rowe said that NRG shareholders had made their decision, and that Exelon will move on. “Now we can redouble our focus on Exelon’s stand-alone growth opportunities. We have the nation’s largest low-carbon nuclear fleet, and our plan to expand our nuclear output through uprates provides even greater upside from carbon legislation. We believe our long-term growth proposition remains the best in the industry."
A takeover would have resulted in a firm with a generating capacity of about 47,000 MW—the largest utility in the U.S., dwarfing both American Electric Power with 36,000 MW and Duke Energy with 35,000 MW of installed power generating capacity.
Source: TransAlta, Canadian Hydro, Exelon.