Babcock & Brown and Singapore Power consortium offer for Alinta
International investment and advisory firm Babcock & Brown in a consortium with several Babcock & Brown managed funds and Singapore Power International Pte Ltd (SPI) (the Consortium) announced that its proposal to acquire the whole of the issued share capital of Alinta Limited (Alinta) (the Offer) has been accepted.
The Alinta Board (the Board) intends to recommend that Alinta shareholders and option holders vote in favour of the proposed scheme of arrangement (the Scheme) (and intend to vote their own shares in favour), in the absence of a better proposal and subject to an independent expert concluding, and continuing to conclude, that the proposal is in the better interests of Alinta shareholders. A Scheme implementation agreement has been signed.
The Babcock & Brown managed funds that form part of the Consortium are Babcock & Brown Infrastructure, Babcock & Brown Power, and Babcock & Brown Wind Partners.
According to Babcock & Brown, its partnership with Singapore Power has made them to structure a unique offer which delivers benefits to all stakeholders. The transaction delivers Babcock & Brown’s specialised funds and asset management platform access to high quality, strategically important assets which are complimentary to existing asset portfolios and deliver significant scale and synergies. The cash generative nature of the assets will allow the Funds to continue to focus on a strong cash distribution profile.
The Scheme is also subject to the receipt of various regulatory approvals. The Consortium is confident of securing these approvals before the commencement of the Scheme. It is expected that the transaction will be completed by the end of July 2007.
Offer Terms:
The proposed acquisition has been valued by the Alinta Board at $15.00 per Alinta share. In addition the consideration will be structured to include a fully franked dividend with franking credits valued at up to 40 cents per Alinta share, increasing the total value to $15.40 per share for Alinta shareholders who can make full use of the franking credits. The cash component of the consideration may be subject to certain working capital and asset sale proceeds adjustments that are expected to be minor.
Under the Offer Alinta shareholders will receive:
$8.50 in cash per Alinta share in cash;
7.83 BBI securities, 3.31 BBP securities and 1.30 BBW securities for every 5 Alinta shares held; and
An in-specie distribution of 1.51 Australian Pipeline Trust (APT) units or equivalent for every 5 Alinta shares;
While delivering to Alinta shareholders a 39% premium to Alinta’s 30 day VWAP prior to announcement by Alinta of a potential management buyout proposal on 9 January 2007, this transaction also allows Babcock & Brown’s specialised funds to participate in a portfolio of strategically important assets valued at approximately $5.4bn and puts their balance sheets in the position to pursue other growth opportunities without the need to raise further capital.
Allocation of Assets:
Minority equity interests and assets of Alinta will be restructured and apportioned amongst Singapore Power and Babcock & Brown managed funds.
Impact on BBI:
BBI, on completion of the transaction, will acquire transmission and distribution assets from the Alinta portfolio in consideration for the issue of 783.4m new securities. BBI’s acquisition delivers key strategic Australian energy transmission and distribution assets that provide essential services to their target markets.
In addition to increasing BBI’s diversity of cash flows, the acquisition meets BBI’s investment criteria by providing BBI with assets that complement its existing portfolio while providing access to stable and predictable cash flows that are underpinned by ideal contractual positions or established regulatory frameworks. The assets acquired also provide organic and step-change growth upsides to BBI.
The additional scale delivered through the acquisition will result in BBI’s position in the ASX100 moving from 84 to approximately 60.
BBI has reaffirmed its previous distribution guidance for the 2007 financial year of not less than 14 cents per security and has also reaffirmed its previous distribution guidance in respect of the 2008 and 2009 financial years.
Impact on BBP:
BBP, on completion of the transaction, will acquire the power generation assets, energy assets and the future power development projects in the Alinta portfolio.
BBP will issue 331.2m new securities as consideration for this acquisition. Babcock & Brown has underwritten a debt bridge facility to enable BBP to acquire 33% of Alinta/AGL which is subject to the outcome of the Alinta/AGL put/call arrangement.
The transaction provides BBP with the opportunity for further diversification of its portfolio into the growing WA energy market, growth opportunities beyond the current portfolio and a good base for BBP to participate in further industry consolidation.
The acquisition of the power generation assets is expected to be immediately accretive to BBP’s June 2008 distribution guidance of 24.0 cents per security. BBP reaffirms medium term expectations of 4% per annum growth in distributions. This transaction will have no impact on the previous distribution guidance of 12.6 cents per stapled security for the period from IPO allotment on 11 December 2006 to year ended 30 June 2007.
Impact on BBW:
BBW will acquire Alinta’s interest in the Wattle Point Wind Farm in consideration for the issue of 130.1m new Stapled Securities.
Benefits to Alinta shareholders:
The Offer provides a unique opportunity for Alinta shareholders to continue to participate in the growth of the Alinta assets, in addition to the growth opportunities within the Babcock & Brown managed funds. The Offer delivers a number of attractive outcomes for Alinta shareholders including:
A premium of 39% to Alinta’s 30 day VWAP prior to announcement by Alinta of a potential management buyout proposal on 9 January 2007;
Exposure to the ongoing growth in demand for power generation and transmission assets in Australia;
Benefits from the aggregation of the Alinta assets with the other power generation and transmission assets in the BBP, BBW and BBI portfolios;
The ongoing payment of tax effective distributions which have in the past recorded growth;
An Offer comprising 56% cash and scrip in established, successful vehicles which are independently valued by the equity market; and
Exposure to Babcock & Brown’s global infrastructure expertise and origination capacity;
Timetable:
The proposed timetable at the present time assumes the Scheme Booklet will be lodged with ASIC in approximately 6 weeks.
Under this timetable the Scheme is expected be completed at the end of July 2007. A break fee of $37.5m (0.5% of the value of the B&B/SPI proposal) will be payable to the Consortium in the event of a third party announcing a competing proposal which becomes unconditional and acquiring a minimum of 50.1% of Alinta or in the event of a material breach of the SIA by Alinta.
Deutsche Bank and UBS acted as financial advisors to Babcock & Brown on the transaction.
8-May-2007