Rival seeks Australian Gas Light - Business - International Herald Tribune

Rival seeks Australian Gas Light
Bloomberg News, Reuters

TUESDAY, FEBRUARY 21, 2006


SYDNEY Alinta, an Australian power utility, said on Tuesday that it had bid 8.9 billion Australian dollars for a bigger rival, Australian Gas Light, pursuing a company three times its size to try to capitalize on power demand in the nation's populous eastern states.

Under Alinta's takeover proposal, valued at $6.6 billion, a plan by Australian Gas to split into separate energy and infrastructure groups would be retained, but Alinta would be in the driving seat and would fold its Western Australian energy assets into the combined companies.

"We believe this can only better AGL's own demerger proposal," the Alinta chief executive, Bob Browning, said at a briefing.

"We're taking the best of their plans and adding to them. It would be incumbent on the AGL board to talk to us."

The combined company would supply 38 percent of Australia's energy customers in a market that is forecast to grow nearly 40 percent by 2020. More than three million customers of Australian Gas in Australia's eastern states would be added to Alinta's 500,000 customers in the west.

Alinta offered 1.773 of its shares for each Australian Gas share, valuing Australian Gas, the nation's largest energy retailer, at 19.45 dollars a share. Sydney- based Australian Gas, which rejected an approach in December, said it would study the proposal.

"These are very complementary assets," said Robert Gee, an analyst at Paterson Securities. "I don't see there being any competitive issues, given the different areas in which they are operating."

Shares in Australian Gas closed 6.3 percent higher at 19.46 dollars after Alinta entered the market to buy its shares in afternoon trading.

Alinta shares were due to resume trading on Wednesday after being halted on Monday.

Alinta has bought 12.9 percent of Australian Gas's stock this week. It snared 10 percent of AGL in an 890 million dollar raid on Monday night and bought a further 2.9 percent on Tuesday.

Those purchases, financed out of Alinta's 2 billion dollar acquisition fund, put it in a strong position to push through its all-share offer for the rest of Australian Gas.

"It has all the signs of a hostile bid, and for investors it has come as a bit of surprise," said Guy Hutchings, chief investment officer with Tower Australia. "I would expect this to go on for some time, and looking at the stock prices of the two companies, it seems there is more in it for investors."

The move is the latest step in the consolidation of Australia's power sector after a series of privatizations. The second-biggest power retailer, Origin Energy, outlined a plan on Monday to absorb its partner in New Zealand.

Alinta said it valued Australian Gas at 16.10 dollars a share but expected that a merged company could deliver more than 100 million dollars a year in cost savings from operating its assets more efficiently.

This would be worth 2.55 dollars a share, it said, and tax and finance benefits would add 80 cents a share in value. $@

Alinta has grown quickly under Browning, picking up pipelines and power stations from Duke Energy in 2004 and booking a A$200 million gain a year later when the assets were sold to its infrastructure arm. The company's share price has more than tripled during his five-year tenure.

SYDNEY Alinta, an Australian power utility, said on Tuesday that it had bid 8.9 billion Australian dollars for a bigger rival, Australian Gas Light, pursuing a company three times its size to try to capitalize on power demand in the nation's populous eastern states.

Under Alinta's takeover proposal, valued at $6.6 billion, a plan by Australian Gas to split into separate energy and infrastructure groups would be retained, but Alinta would be in the driving seat and would fold its Western Australian energy assets into the combined companies.

"We believe this can only better AGL's own demerger proposal," the Alinta chief executive, Bob Browning, said at a briefing.

"We're taking the best of their plans and adding to them. It would be incumbent on the AGL board to talk to us."

The combined company would supply 38 percent of Australia's energy customers in a market that is forecast to grow nearly 40 percent by 2020. More than three million customers of Australian Gas in Australia's eastern states would be added to Alinta's 500,000 customers in the west.

Alinta offered 1.773 of its shares for each Australian Gas share, valuing Australian Gas, the nation's largest energy retailer, at 19.45 dollars a share. Sydney- based Australian Gas, which rejected an approach in December, said it would study the proposal.

"These are very complementary assets," said Robert Gee, an analyst at Paterson Securities. "I don't see there being any competitive issues, given the different areas in which they are operating."

Shares in Australian Gas closed 6.3 percent higher at 19.46 dollars after Alinta entered the market to buy its shares in afternoon trading.

Alinta shares were due to resume trading on Wednesday after being halted on Monday.

Alinta has bought 12.9 percent of Australian Gas's stock this week. It snared 10 percent of AGL in an 890 million dollar raid on Monday night and bought a further 2.9 percent on Tuesday.

Those purchases, financed out of Alinta's 2 billion dollar acquisition fund, put it in a strong position to push through its all-share offer for the rest of Australian Gas.

"It has all the signs of a hostile bid, and for investors it has come as a bit of surprise," said Guy Hutchings, chief investment officer with Tower Australia. "I would expect this to go on for some time, and looking at the stock prices of the two companies, it seems there is more in it for investors."

The move is the latest step in the consolidation of Australia's power sector after a series of privatizations. The second-biggest power retailer, Origin Energy, outlined a plan on Monday to absorb its partner in New Zealand.

Alinta said it valued Australian Gas at 16.10 dollars a share but expected that a merged company could deliver more than 100 million dollars a year in cost savings from operating its assets more efficiently.

This would be worth 2.55 dollars a share, it said, and tax and finance benefits would add 80 cents a share in value. $@

Alinta has grown quickly under Browning, picking up pipelines and power stations from Duke Energy in 2004 and booking a A$200 million gain a year later when the assets were sold to its infrastructure arm. The company's share price has more than tripled during his five-year tenure.