TransAlta gets $7.75 billion bid; Canada\'s largest generator of wind power is targeted by a pair of

Date: Wednesday, July 23, 2008
Author: Toronto Star

Two U.S. private equity firms are offering about $7.75 billion - or $39 a share in cash - to privatize Alberta-based utility TransAlta Corp., which had been under pressure by a major investor to boost its stock price.

LS Power Equity Partners and Global Infrastructure Partners presented TransAlta with a "non-binding approach" yesterday.

TransAlta said its board will "carefully consider the letter and will respond in due course."

LS Power Equity Partners is linked to Luminus Management LLC, the New York-based hedge fund that fought earlier this year to persuade TransAlta to shed assets and to load up on debt as a means to buy back shares.

LS Power president James Bartlett said suitors are seeking a "consensual, negotiated transaction."

The proposal yesterday is a premium of 21 per cent over TransAlta's TSX price Friday of $32.25.

The stock has traded in a 52-week range between $37.60 and $27.07.

TransAlta shares jumped as high as $38.10 on the news.

LS Power Equity Partners and Luminus, closely related to Houston-based Dynegy Inc., together already own a 9 per cent stake in TransAlta, Canada's largest generator of wind power.

Global Infrastructure Partners is a joint venture of Credit Suisse and General Electric Co.

TransAlta's head office would remain in Alberta, Bartlett said, and it would remain "business as usual" for power consumers in the province.

"We, by the nature of being a private company versus a public stockholder, aren't worried about quarter-to-quarter earnings targets, and we think that's frankly the best way to support the company and give it the flexibility to invest and execute over the long term," Bartlett said.

Dealing with the heavily coal-dependent generator's environmental sustainability would be a key issue, Bartlett said.

"We believe in developing sources of renewable energy, greenhouse gas solutions.

"And as well, like TransAlta, we believe that it's important to identify sustainable ways to increase generation capacity."

Bartlett did not specify how ownership of TransAlta would be split between LS Power and Global Infrastructure Partners, but the two "are straight-up partners in the transaction," he said.

Earlier this year, Luminus sought to shake up the utility's board, aiming to force it to sell assets and bulk up its debt to buy back shares.

The hedge fund withdrew its proposed slate of directors in March after some of its demands were met, including the sale of TransAlta's power business in Mexico.

Whether another bidder enters the scene, Luminus, as a major TransAlta shareholder, benefits, said Desjardins Securities analyst Daniel Shteyn.

TransAlta earned $33 million in its latest quarter, down from $56 million in the first quarter of last s year.

Sales rose to $803 million from $669 million. The company will release second-quarter results on July 31.