Innergex Renewable Energy to Acquire Alterra Power for USD858.3 Million

Published: Oct 30 2017
Deal Summary

Innergex Renewable Energy Inc (Innergex), a renewable energy company, has agreed to acquire Alterra Power Corp (Alterra), a renewable energy company that manages operations of eight power plants, for a purchase consideration of CAD1,100 million (USD858.35 million) including the assumption of Alterra's debt.

Under the terms of acquisition, Innergex is offering to acquire all of the issued and outstanding Alterra common shares by way of a plan of arrangement. Alterra shareholders will receive, at the election of each such shareholder, either (i) CAD8.25 (USD6.44) in cash or (ii) 0.5563 Innergex common shares for each Alterra common share, subject in each case to the pro-ration, such that the aggregate consideration paid to all of Alterra shareholders will consist of approximately 25% in cash and 75% in Innergex common shares. Giving full effect to the proration, the consideration of each Alterra common share represents CAD2.06 (USD1.61) in cash and 0.4172 Innergex common shares. The share consideration is based on Innergex's common share closing price of CAD14.83 (USD11.57) on the TSX on October 27, 2017. The price of CAD8.25 (USD6.44) per Alterra common share represents a premium of 58% to Alterra's 20-day volume weighted average price of CAD5.21 (USD4.06) on the TSX as of October 27, 2017.

Innergex has structured the financing of the cash portion of the transaction. To that end, Caisse de depot et placement du Quebec has made a commitment to provide Innergex with a five-year CAD150 million (USD117.05 million) subordinated unsecured term loan at a competitive interest rate to be fixed at closing. Innergex has also obtained commitments from two leading Canadian banks to backstop its existing credit facilities, to implement the transaction and to upsize its revolving credit facility to an aggregate amount of up to CAD700 million (USD546.22Z million), representing a CAD275 million (USD214.59 million) increase from the principal amount of CAD425 million (USD331.63 million) under its existing revolving credit facility.

BMO Capital Markets is acting as financial advisor while McCarthy Tetrault LLP is acting as legal advisor to Innergex for the transaction. National Bank Financial Inc. and Marathon Capital LLC are acting as financial advisors while Borden Ladner Gervais LLP is acting as legal advisor to Alterra for the transaction. Raymond James Financial Inc is acting as a financial advisor while Blake, Cassels & Graydon LLP is acting as legal counsel to the special committee.

The transaction is subject to approval of at least 66 ?% Alterra common shares represented in person or by proxy at a special meeting of Alterra shareholders to be called to consider the transaction – expected to be held in December 2017 (special meeting). The board of directors of Alterra, having received a unanimous recommendation from a special committee comprised solely of independent directors (special committee), has unanimously approved the transaction and recommends that Alterra shareholders vote in favor of the transaction. The special committee of Alterra has received an opinion from its financial advisor, Raymond James Ltd., that the consideration to be received pursuant to the arrangement agreement is fair, from a financial point of view, to the Alterra shareholders. In addition to Alterra shareholder approval, the transaction is subject to court and certain regulatory approvals in Canada and US, key third party consents and other customary closing conditions. The transaction is not subject to approval by Innergex shareholders.

The arrangement agreement provides for customary non-solicitation covenants on the part of Alterra and a right in favor of Innergex to match any unsolicited superior proposal. If Innergex does not exercise its right to match, Innergex would receive a termination fee of approximately CAD18 million (USD14.04 million) from Alterra in the event the arrangement agreement is terminated as a result of a superior proposal. Subject to the receipt of all required regulatory approvals and key third-party consents, closing of the transaction is expected to occur in the first quarter of 2018.

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