Macquarie may still win Alinta

The Alinta board agrees to review a new takeover proposal from Macquarie Bank at the risk of paying a break fee to Babcock & Brown and Singapore Power.
The A$7.2 billion battle to buy AustraliaÆs largest gas and power utility took an interesting turn yesterday as the board of Alinta decided to examine a new bid from Macquarie Bank.

The new offer is said to include a full-cash option which might make it more appealing to Alinta shareholders who have already been told to vote in favour of another bid from Babcock & Brown (BNB) and Singapore Power. Alinta signed a scheme of arrangement with BNB Singapore Power on March 30, after considering competing proposals from the BNB consortium and Macquarie Bank. It shunned Macquarie Bank's first offer because it involved too much financial engineering.

The scheme of arrangement with BNB Singapore Power includes a A$37.4 million break fee that Alinta now risks paying.

Detailed terms of the new Macquarie deal could be made public as early as today, but if it includes a full-cash option that matches or beats BNB Singapore PowerÆs offer of A$15.45 a share, it has a good chance of winning. MacquarieÆs old offer centered around Alinta shareholders, many of whom are retail investors, taking shares in a newly formed infrastructure company that would hold some of AlintaÆs assets, but not its most high-growth assets.

The Macquarie offer included a cash alternative for shareholders but this was conditional on equity underwriting agreements totaling A$4.7 billion for a period of up to four months. Alinta expressed concern about the size and robustness of the underwriting commitments.

The proposal from BNB Singapore Power also involves a combination of cash and scrip, but by comparison, the cash component is relatively condition fee. The scrip, too, comes in the form of shares in three of BNBÆs specialist trusts. In recommending this proposal, Alinta said there was more certainty in the BNB Singapore Power deal because the trusts were tried and tested ventures with an observable market price.

Macquarie has given a hint of what is in the new proposal, and the terms appear to target specific fears that Alinta expressed back in March. In a statement yesterday, the bank confirmed that it has signed an agreement with AGL Energy that could release up to A$345 million and improve its ability to make a cash offer. The bank says that, if it successfully acquires Alinta, it will allow AGL Energy to buy the 67% share in the AlintaAGL business that it doesnÆt already own.

Macquarie will return the proceeds of the sale to Alinta shareholders. ôShareholders will have a full cash option,ö the bank said.

Macquarie also announced that, as the consortium leader, it was underwriting more than A$1.1 billion in equity to support the proposal, and that it would make an equity commitment as part of the deal. This new underwriting scheme is obviously designed to allay AlintaÆs concerns about its aggressive financing package.

The revised bid would have already received support from the dealÆs original underwriters including ABN AMRO Rothschild, Citigroup, Credit Suisse and Goldman Sachs JBWere.

BNB Singapore Power responded to the news of MacquarieÆs revised bid yesterday by saying that the value of its own scrip-based bid was now closer to A$15.99 per Alinta share based on the rising prices in its specialist funds. Though analysts say the rise in the funds has occurred because unit-holders have factoring in the Altina deal proceeding.

BNB Singapore Power says it has sweetened its offer to Alinta since the two entered the scheme of arrangement in March, including allowing for an all-cash offer to small shareholders with 1,000 or less shares û with this group representing about 65% of the companyÆs register.

The BNB consortium said its proposal still offered Alinta shareholders the best deal because of its limited conditionality, certainty and transparency.

At the end of business in Australia yesterday, AlintaÆs shares remained in a trading halt as the board considered the new Macquarie proposal. On Friday last week, the companyÆs shares closed at A$15.25 each.

Shareholders are due to vote on the takeover in a meeting scheduled for August this year.
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