Contact Energy [CEN] is set to take over fellow power generator Manawa Energy [MNW] in a shares and cash deal that values Manawa at around $2 billion.
The deal, to be consummated by a court-sanctioned Scheme of Arrangement may take as much as nine months to complete.
For Manawa's 51% shareholder Infratil [IFT] the deal nearly completes a full circle. Manawa - formerly known as Trustpower - was Infratil's first investment when it was initially listed on NZX 30 years ago. And it has been a fabulously lucrative investment for Infratil.
The deal will see Infratil become a 9.5% shareholder in Contact.
A statement from Manawa on NZX said the takeover deal valued the company at $5.95 per share, compared with a closing price of $4.03 on the market on Tuesday.
Manawa shareholders would receive 0.5719 Contact shares and $1.16 cash for each of their shares.
Manawa chairman Deion Campbell, who will join the Contact board, said this is "an attractive acquisition offer for Manawa and achieves a significant premium to Manawa’s recent share price for shareholders, reflecting the company’s high-quality hydro asset base and its strategic development portfolio".
"The combination of our hydro schemes with Contact’s generation assets, including its base load geothermal fleet, creates a unique generation portfolio, with significant diversification benefits. Contact will retain various funding options post implementation of the Scheme that mean it will be well-placed to accelerate the progression of Manawa’s development portfolio."
Manawa and Contact are targeting implementation of the Scheme of Arrangement in the first half of 2025, "although this is indicative and subject to change".
The Manawa statement said the Scheme implementation timing will depend on the timing of NZ Commerce Commission approval. Contact is starting the Commerce Commission application process this week.
In its statement to NZX about the deal, Contact said the cash consideration and repayment of outstanding Manawa bank debt and bonds will be funded via new committed Contact bank debt facilities.
"The choice of transaction structure to include scrip [shares] enables capital options to be maintained to ensure Contact has sufficient funding flexibility to execute on the combined entity’s identified development pipeline whilst maintaining a BBB S&P credit rating. Contact expects S&P to reaffirm Contact’s BBB credit rating on a stable outlook," the statement said.
Contact also released a presentation on the takeover.
In its statement, Infratil said if the Scheme proceeds as announced, and subject to any pre-completion dividends, Infratil’s gross cash proceeds from the sale will be approximately $186 million and following completion it will own approximately 9.5% of Contact.
Since 1994 Infratil says it has been involved in "a series of transformative transactions" with Manawa, including the demerger of wind farm company Tilt Renewables and the sale of its Australian hydro assets and retail business.
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