Alinta cannot acquire more than 19.9% of the shares under Australian takeover laws without first putting a formal offer to AGL shareholders. But it is already in a position to block AGL’s plans to demerge.
The company told the ASX yesterday afternoon that it raised its interest in AGL from 10% to 12.9% after buying additional stock at up to $19.45 per share.
Following this announcement, AGL released a statement to the ASX saying it had still not received a formal merger proposal for review by Alinta.
“The Board will advise further once they have received and had the opportunity to consider Alinta’s formal proposal,” AGL said.
AGL plans to split into an energy retail business focused on earnings growth, and a power generation, distribution and transmission networks business with stable returns from regulated assets. The company said yesterday that its proposed demerger remains the best option for delivering shareholder value.
The vote on March 27 requires 75% of voting shareholders to sanction the demerger. Because not all shareholders will vote, Alinta is now in a position to stop AGL's plans, given it can vote its 19.9% stake against the proposal.
Alinta said it believed that a merger of the two companies, followed by a separation of the combined entity’s infrastructure and energy assets, created more value for AGL shareholders than the demerger.
Under Alinta’s proposal, current AGL shareholders would own a share in a merged AGL/Alinta energy company and a share in a merged AGL/Alinta infrastructure company.
Alinta has proposed an all-share $A8.9 billion merger to be achieved through a scheme of arrangement. It is proposing an offer of 1.773 Alinta shares for each AGL share.
Alinta recently sold its small stake in AGL, and its current equity is believed to have been acquired in the last few days through off-market dealings with institutional investors.
If the mooted merger between Alinta and AGL proceeds, it will create the country’s leading energy retailer and infrastructure group that would supply energy to 4 million residential and commercial customers.
AGL's assets are concentrated in the eastern states while Alinta's are predominantly in Western Australia, so a merged company would have a good chance of being cleared by the ACCC.
Alinta would also assume control of regulated assets, including AGL’s NSW gas network and Victorian power distribution business, a suite of pipelines power-generation assets including the Southern Hydro and the newly acquired interest in the PNG Gas Project.
In pushing to merge with AGL, Alinta is taking on a company that is three times its size. Alinta is capitalised at less than $A3 billion, while AGL is worth about $A9 billion.
It has become Australia’s biggest bid since BHP Billiton’s $9.2 billion takeover of WMC Resources last year.
Alinta CEO Bob Browning told the Australian Financial Review that the company would also seek a “high-level meeting” about taking over Australian Pipeline Trust, in which AGL owns 30%.
The company was “sort of used to being the David in the David and Goliath match-ups,” Browning said, a reference to Alinta’s takeover of the much larger United Energy in 2003 and the Duke Energy deal a year later.
