Pacific Equity in A$415m green energy bid

Infratil-backed Energy Developments has rejected the private equity firm’s offer as too low, but said it will not impede a similar 'off-market' takeover bid.

Pacific Equity Partners (PEP), Australia’s largest private equity firm in terms of assets under management, has made a A$415 million (€256 million; $382 million) offer to purchase Energy Developments. The renewable energy provider, based in Brisbane, counts as its largest shareholder New Zealand-headquartered infrastructure investor Infratil.

PEP has offered to pay A$2.65 per share, prompting the stock to rise above A$2.50. 

Energy Developments has described PEP’s valuation of the company’s long-term future as inadequate, but said in a statement it would not stand in the way of the private equity firm making an off-market bid.

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The company said it “has released PEP from its existing standstill obligations, so as to allow it to make such a bid, should it wish to do so”.

A market bid is made via the stock exchange, while an off-market bid, formerly known as “Part A Offers of Takeover” in Australia, sees interaction between individual shareholders and the buyer.

An independent expert has been appointed to determine whether the Pacific Equity Partners offer is fair and reasonable.

Energy Developments (ENE), which owns and operates power stations processing fuels including landfill gas and waste coal mine gas in Australia, the US, Europe and the UK, has been approached by private equity funds looking to finance a take-private before.

Earlier this year, a consortium of funds led by Australian private equity firm Archer Capital proposed to acquire 100 percent of the business for A$2.80 per share, or A$430 million.

It was also approached by an unnamed French infrastructure fund manager, which had offered to buy the company's UK and French landfill gas power generation interests. “Following protracted negotiations, ENE concluded that the contractual terms proposed by the bidder were unacceptable, and no longer reflects the underlying value of the Company’s UK and French LFG operations and development opportunities,” the company said.

Energy Development said it was optimistic about its prospects in an environment where businesses had to manage their carbon emissions carefully. “The company has been encouraged by the development of carbon legislation internationally, and anticipates that these regulations will recognise and accommodate the valuable contribution to carbon abatement that [our] operations will make in the future.”

PEP held talks with the company in August and has done due diligence on the business. Its valuation of the asset reportedly reflects currency-related losses the company has incurred in its European operations and its failure to sell them. 

According to national newspaper The Australian, PEP is thought unlikely to improve its offer. The newspaper also reported that PEP would finance the proposed acquisition without any debt.