Infigen Energy in favour of Second Takeover Bid | KOSEC

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Infigen Energy in favour of Second Takeover Bid

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC - Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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Exactly two weeks after it received its first takeover bid, Infigen Energy has today reacted positively to a second bid from Iberdrola Renewables Australia Limited. Specifically, a Bid Implementation Agreement (BIA) between both parties has been signed under which Iberdrola Renewables will make a takeover bid at a price of 86 cents per stapled security in cash.

As a global energy leader, Iberdrola is the top producer of wind power and one of the world’s most prominent electricity utilities provider by market capitalisation. Additionally, the firm also has more than 55GW of installed capacity with key global positions in the UK, US, Spain and South America. More notably, both firms are not strangers to one another. Instead, the offer is the outcome of a long, amicable relationship between both parties.

The acquisition will enable the Iberdrola group to build on its presence in the Australian renewable energy sector where it currently is in the midst of developing a 320 MW Port Augusta Renewables Energy Park in South Australia. Additionally, the successful completion of the project will be dependent on the integration of Infigen’s portfolio of wind generation assets. The Iberdrola group also plans to capitalise on Infigen’s expertise into its global footprint. Specifically, Infigen’s strength is evident through the fact that 75 per cent of its sales from operational assets fall under long-term contracts. This will, therefore, allow the group to be one step closer to becoming the largest renewable player globally with a renewable installed capacity of 33GW.

Meanwhile, Infigen’s response towards this second bid is vastly different from the first it received previously. A fortnight ago, UAC Energy made a bid to take over the firm at 80 cents per stapled security, to which Infigen urged stakeholders to take no action. Yet, in Iberdrola’s bid which offers a 7.5 per cent premium to UAC’s offer, the Board has come to a consensus that shareholders accept the offer. However, there exist other factors influencing Infigen’s decision.

From a broader point of view, Iberdrola’s offer comes with less binding conditions than UAC’s offer. This includes not being subject to the disclosure conditions and due diligence contained in the first offer. More important from Infigen’s point of view, Iberdrola is aware of the terms of Infigen’s debt facilities. Nevertheless, several conditions remain. The deal is contingent on the approval from the Foreign Investment Review Board (FIRB) under the Foreign Acquisitions and Takeover Act as well as the expectation that no material adverse changes will possibly occur.

As a result of both Iberdrola Renewables and UAC Energy making off market takeovers, Infigen has therefore announced that it will not be paying a distribution for the half-year ending 30 June 2020. The decision aims to bring down the conditionality of the bids, which, in turn, will provide more certainty for shareholders.

By Caroline Wong 

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