Improved offers for Infigen: Board members recommend Iberdrola’s bid if there is no superior offer

Summary

• Infigen, a Sydney-based renewable energy retailer, has been in the limelight because of the acquisition offers made by UAC and Iberdrola. Both parties find IFN’s acquisition in line with their strategic goals.
• Iberdrola Australia, which offered to buy all Infigen Stapled Securities for A$0.86, had increased its Offer to A$0.89 per Stapled Security. The Company, later, waived specific conditions related to the takeover bid.
• UAC, which earlier made an off-market takeover bid of A$0.80 per Infigen stapled security, had also improved its Offer to A$0.86 per Stapled Security.
• Infigen’s board recommends the security holders that in the absence of a better offer, they should accept Iberdrola’s bid.

Sydney-based clean energy supplier Infigen Energy (ASX:IFN) offers customised energy solutions to businesses across Australia. The Company can provide 100% renewable energy and caters to customers across manufacturing, food and beverage, construction, and telecom industries, among others.

Infigen Energy has been in the limelight during June 2020 as two companies have amended their offer price to acquire 100% of IFN. In this article, we would first look at the recent Offers made by the two companies and the Company Board’s recommendation.

Infigen Board Recommends Accepting Iberdrola’s Bid if there is no Superior Proposal

Infigen Energy announced today that it recommends its security holders that in the absence of a better offer, they should agree to Iberdrola Australia’s offer (A$0.89 per stapled security).

The recommendation came after careful consideration of the two offers and post the removal of specific conditions (barring the FIRB Approval and Minimum Acceptance Condition) from Iberdrola.

Earlier, after receiving the two bids, the Board of Infigen had advised its shareholders not to take any action. Both the offers made by UAC and Iberdrola would remain open for some time. The UAC offer would remain open till at least 7 PM (Sydney, Australia time) on 24 July 2020 while Iberdrola Offer until at least 7 PM (Sydney, Australia time) on 30 July 2020.

Let us look at the improved offers made by the two companies.

Revised Offers made my UAC and Iberdrola

On 29 June 2020, Infigen Energy received an updated offer from UAC Energy Holdings Pty Ltd (UAC) and Iberdrola Renewables Australia Pty Limited (Iberdrola).

UAC had declared its Offer wholly unconditional and increased its Offer Price to A$0.86 per Stapled Security. It would accelerate payment terms to T+10 Business Day, and in case there was a need due to a change in control of Infigen, UAC would obtain the provision of an unsecured loan to IFN, on arm’s length terms, to refinance its Corporate Facility.

On the other hand, Iberdrola Australia had increased its offer price to A$0.89 per stapled security. The Company had modified its conditional off-market takeover offer which it initially announced on 17 June 2020.

Let us understand the entire journey of the takeover bid and see the reason behind the Offer.

UAC Energy Holdings Pty Ltd Transaction Details:

On 3 June 2020, UAC announced its intention to make an off-market takeover bid of A$0.80 per Infigen stapled security. It offered A$777 million to acquire 100% of Infigen.

UAC, an investment holding company, is co-owned by the AC Energy Group (75% stake), and UPC Renewables Australia (25% stake). UPC\AC Renewables Australia is, in turn, operated as a joint venture between AC Energy & the UPC Renewables Group and has been operational in Australia for three and a half years.

UAC and the UPC Renewables Group announced that they acquired an aggregate interest in 12.82% of the Infigen stapled securities. It comprises of beneficial ownership of 9.90% of the Infigen stapled securities and economic interest in additional 2.92% of the Infigen stapled securities through a Total Return Swap (TRS).

The Offer made by UAC reflects 43.4% premium to the one-month volume-weighted average price (VWAP) of A$0.56 per stapled security. The Offer made was subjected to the various condition which includes approval from FIRB and specific terms about a possible change of control provisions in IFN’s debt financing deals and would not be subjected to a minimum acceptance condition.

On 19 June 2020, the takeover bid was approved by Foreign Investment Review Board (FIRB) and Commonwealth has no objection to its proposed acquisition of Infigen.

DO READ: Takeover Play for Infigen by UAC, Share Price Skyrocketed 33.051%

UAC’s rationale for the Offer:

AC Energy and UPC have considerable understanding in investing in developing, owning, and operating renewable energy assets within Asia and across the APAC region. Apart from this AC Energy and UPC have a strong belief concerning the significant long-term future of renewable energy in the world and the Australian energy market and in the role of renewable energy to lower energy costs and, via application of a set of solutions (comprising batteries & pumped hydro), provide reliable energy.

Through UAC, AC Energy & UPC have plans to invest & contribute in the Australian energy sector via an investment in IFN, which has a business model that is in line with to their longer-term strategy.

Iberdrola Renewables Australia Pty Limited Takeover Bid:

On 24 June 2020, Iberdrola Renewables Australia Pty Limited release an announcement related to the takeover bid for all stapled securities of Infigen Energy Limited and Infigen Energy Trust. A copy of the Bidder statement was filed with both ASIC and ASX.

Summary of the Offer made by Iberdrola:

Iberdrola Australia offered to buy all Infigen Stapled Securities for A$0.86 cash per Infigen Stapled Security as per the terms and conditions provided in the Bidder’s Statement. Iberdrola Australia is the subsidiary company of Iberdrola, S.A., which is a Spanish business with a market cap of €65.76 billion and was incorporated in the year 1901 and is amongst the leading private electricity groups in the world concerning the market and the service provided to several users.

The conditions of the Offer include:

• Minimum Acceptance Condition.
• FIRB Condition.
• No Regulatory Impediment.
• No Material Adverse Change.
• No Specified Event.
• No Prescribed Occurrences.
• No Untrue and/or misleading Statements to ASX.

The expected date of the payment of Infigen Securityholders who accept the Offer in case the Offer becomes or is declared unconditional would be earlier of:

• one month after the Offer is agreed or if the Offer is subject to a condition, within one month after the Offer converts or is announced unconditional.
• Twenty-one days post the closure of the Offer Period.

ALSO READ: Infigen Energy Receives Superior Offer, While Santos Secures Yet Another Gas Offtake

Iberdrola’s rationale for the Offer:

Iberdrola Australia decided to make this Offer because of the long and friendly relationship between the Iberdrola Group and Infigen. It also considered that the acquisition of Infigen’s portfolio of assets is in line with Iberdrola Group’s aim to invest in high-quality renewable power assets in Australia. It would enable Iberdrola Group to utilise its rich global experience in renewable energy to build on Infigen’s current operating expertise.

Further, Iberdrola Australia aims to strengthen its existence in Australia where it is building its Port Augusta Project in South Australia, a hybrid wind & solar plant with a total installed capacity of 317MW.

Stock Information:

On 30 June 2020, IFN shares were trading at A$0.915 (at 01:27 PM AEST), in line with its previous close. The Company has a market cap of A$888.19 million, with ~970.7 million shares outstanding.