The board of directors of Canadian energy company TransAlta, has unanimously rejected a C$7.7 billion ($7.7 billion; €4.9 billion) all-cash takeover bid on the basis that the company was undervalued.
LS Power Equity Partners and Global Infrastructure Partners had offered to purchase all outstanding common stock at C$39 per share, a 21 percent premium over the energy company’s closing price on 18 July.
The proposed deal included a $6 billion equity cheque. This would have been be supplemented by $2 billion in debt provided by Credit Suisse, which would also provide a $1.5 billion backstop credit facility if needed to refinance TransAlta’s existing commercial bank facility and $500 million in recently issued senior notes, according to the firms’ offer letter.
“We respect both LS Power and GIP but their highly conditional approach fails to recognise TransAlta’s fundamental value and growth potential,” TransAlta board chair Donna Kaufman said in a statement. “Accepting their invitation to engage in a dialogue about a possible acquisition of the company is not in the best interest of TransAlta and its shareholders.”
A TransAlta spokesman declined further comment.
LS Power and GIP said at the time that they were committed to working with the company’s board and completing a consensual transaction.
“In a private company structure, with owners taking a long-term view, TransAlta and its leadership would have significant flexibility in making strategic investments and plans that benefit stakeholders,” LS Power and GIP said last month.
TransAlta sold two Mexican power plants to InterGen, a global power generation company jointly owned by AIG Highstar Capital and the Ontario Teachers’ Pension Plan, in a $304 million transaction last February.
LS Power, a private equity affiliate of New York-based hedge fund Luminus Management, currently owns some 9 percent of TransAlta’s stock and is its largest shareholder. Last year the firm closed its second energy fund on $3.1 billion.
GIP, which in May closed a $5.6 billion infrastructure fund, is based in Stamford, Connecticut and was founded with funds from Credit Suisse and General Electric.