Alberta-based energy producer TransAlta Corp. said on Tuesday it will acquire the outstanding common shares it does not already own of TransAlta Renewables Inc. in a cash-and-equity deal valued at $1.38-billion.
TransAlta Renewables’ shareholders can opt for 1.0337 common shares of TransAlta or $13 in cash for each share outstanding, representing an 18.3-per-cent premium based on the closing price of Renewables shares on the Toronto Stock Exchange on Monday. TransAlta is restricting the number of common shares it will issue to 46 million, while the maximum cash available is $800-million.
TransAlta spun out a portion of its renewables division – which generates electricity from wind, hydro and solar plants – in an initial public offering in 2013, but retained a 60-per-cent stake in the company.
At the time of the IPO, each common share of Renewables was valued at $10, raising $200-million. The spinoff was meant to cover the costs of the transition out of coal-fired power plants.
TransAlta said its decision to buy back the minority stake will align strategies between the two companies, diversify assets, and help sustain quarterly dividends for shareholders.
TransAlta has launched a clean-electricity growth plan to add new generating capacity and additional clean-energy projects across Canada, the United States and Australia.
“Now is the right time to bring these two companies together to create a single clean-electricity leader,” TransAlta chief executive John Kousinioris said in a news release.
“The combined company’s greater scale and enhanced positioning will drive benefits and unlock value for all of our shareholders. The combination of the two companies will be underpinned by a single strategy that provides greater clarity to investors and will support future growth.”
In April, TransAlta acquired a 50-per-cent stake in Tent Mountain Renewable Energy Complex, an early-stage hydro energy storage project, in a deal worth up to $24.7-million.
In the 12 months ended March 31, TransAlta reported net income of $158-million on revenue of $3.33-billion, according to S&P Global Market Intelligence.
David Drinkwater, chair of the board of directors of TransAlta Renewables, said the transaction will restore cash flow certainty for Renewables shareholders.
“It resolves significant risks associated with maintaining RNW’s current dividend level given challenges with RNW’s cash available for distribution due to near-term contract expiries, significant increases to cash taxes and other factors,” he said in the press release.
Shares of TransAlta Renewables climbed 18 per cent to $13.01 on the Toronto Stock Exchange as of early afternoon Tuesday. Meanwhile, shares of TransAlta rose 1.23 per cent to $12.38.