Alinta Sold to 2 Firms in Deal for $6 Billion

Singapore Power and Babcock & Brown have agreed to buy Alinta for 7.4 billion Australian dollars, gaining the assets of the biggest owner of natural gas pipelines and electricity networks in Australia, Alinta said Friday.

The cash and stock offer, worth $6 billion, amounts to 15 dollars a share, or 6 percent more than Alinta stock’s closing price Thursday.

Singapore Power and Babcock, the second-biggest investment bank in Australia, defeated a rival bid by Macquarie Bank, the biggest. The companies will also assume 6.5 billion dollars in debt.

Singapore Power, the island state’s electricity monopoly, and Babcock plan to break up the utility whose market value has increased since it was sold by the Western Australian government in 2000. Energy use in Australia is projected to increase 46 percent by 2030, driven by a boom in demand for iron ore and coal from the country, the biggest exporter of those commodities.

The buyers “are getting a considerably bulked-up presence in the Australian market,” said Jack Chemello, a fund manager at BT Financial Group in Sydney. Now “there are several international players with a solid presence in the local energy market.”

Alinta shares have jumped 22 percent this year, more than the 5.7 percent gain in the benchmark S&P/ASX 200 index, partly driven by an announcement in January of a management buyout, or MBO, proposal, which triggered the sale process.

“The market will be happy with 15,” said Wendy Casey, head of research at DJ Carmichael in Perth, referring to the price per share. Alinta shares “have obviously already done a run-up on the MBO proposal.”

The Alinta board preferred the Singapore Power-Babcock offer because Macquarie’s offer, while including an all-cash alternative, involved offering stock in a restructured Alinta as the default for shareholders who did not vote on the transaction, John Akehurst, chairman for Alinta, said during a conference call. The directors said that stock, or scrip, was too risky, Akehurst said.

“Unfortunately it was not possible to have the cash offer without the scrip offer,” Akehurst said. Macquarie made a higher offer early Friday morning, he added, after Alinta had signed its agreement with Singapore Power and Babcock.

Lisa Jamieson, a spokeswoman for Macquarie in Sydney, declined to comment.

Under the Singapore Power-Babcock proposal, Alinta shareholders will get 8.50 dollars in cash for each Alinta share, plus 7.83 shares in Babcock & Brown Infrastructure Group, 3.31 shares in Babcock & Brown Power and 1.3 shares in Babcock & Brown Wind Partners for every five Alinta shares, plus a distribution of 1.51 shares in Australian Pipeline Trust for every five Alinta shares.

Singapore Power will pay most of the cash part of the offer, Lim Lay Hong, a spokeswoman, said during an interview by telephone from Singapore. She declined to comment on the overall split of the 13.9 dollar billion purchase, including debt, between the bidding partners. The Singapore company will finance the bid from its cash and bank loans, she said.

The offer will include a dividend of as much as 40 cents a share, including tax credits, for shareholders in Australia, Alinta told the Australian Stock Exchange.

The Alinta board weighed the two offers against a potential plan to split the company in two and decided that the offer from Babcock & Brown and Singapore Power was “superior,” Akehurst said.

“While it will be sad to see the end of Alinta as a listed company, the consortium’s offer is an attractive one,” he said.

As part of the transaction, Babcock & Brown Infrastructure, whose assets include ports, pipelines and a coal terminal, will acquire Alinta’s energy transmission and distribution assets, and its maintenance business, for about 2.56 billion dollars including debt. It will pay for the purchase by issuing shares to Alinta shareholders, and it will assume 1.1 billion dollars of debt.

Babcock & Brown Power, a power generation fund set up last year, will buy Alinta’s power generation plants, with a capacity of about 970 megawatts, plus Alinta’s 67 percent share in an energy retailing business. The purchase is worth about 2.6 billion dollars including debt, Babcock Power said.

Babcock & Brown Wind Partners will buy Alinta’s Wattle Point wind farm in South Australia. It will pay for the transaction in stock and cash.

The deal “positions Babcock & Brown funds in a very favorable way,” Peter Hofbauer, head of infrastructure at Babcock, said during a conference call. Assets worth about 5.4 billion dollars will be transferred to Babcock’s funds, he said.

Singapore Power, owned by the Singapore government, will get pipelines in Queensland and New South Wales, a natural gas distribution business in New South Wales and the Australian Capital Territory, a 34 percent stake in United Energy and Alinta’s asset management business in eastern Australia.

Alinta shareholders will probably vote on the transaction, which will be assessed by an independent expert, in July, Akehurst said.

(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.