AGL employed a classic delaying tactic on Monday by putting its own demerger plans on hold and launching a reverse offer to buy Alinta for A$2.7 billion, just three weeks after Alinta bought 19.9% of AGLÆs shares from willing institutional investors in an attempt to push AGLÆs management into merger talks.
Alinta was not given any warning of AGLÆs surprise tactic despite signing a confidentiality agreement on March 10 that was meant to herald the beginning of sit-down talks.
AlintaÆs executives say they will continue to try to engage AGLÆs executives and its advisors UBS and Goldman Sachs JBWere in amicable negotiations but have not ruled out the idea of a formal hostile takeover.
The companyÆs chairman John Poynton has written to shareholders urging them to reject AGLÆs reverse offer. ôSwapping your Alinta shares for AGL shares would seriously compromise your investment,ö he wrote on Wednesday. ôAGL is offering you a zero control premium for your shares and its offer is at a discount to recent trading levels.ö
He said AGL was attempting to buy his companyÆs share with ôinflated currencyö, essentially exploiting the premium in its own price.
Analysts say AGLÆs counter-offer is just a defense mechanism aimed at generating a higher price. But it has also presented Alinta with a dilemma. Since the offer is formal, Alinta has to take it seriously and follow due course, otherwise it might be seen to be frustrating the process by the Takeovers Panel.
There are many similarities in the two bids. Both are scrip offers and both propose a demerger of the energy and infrastructure businesses into separate listed entities. The issues in contention are price, management and capital structure.
On the face of it, AlintaÆs offer to AGL is still better value, pricing AGLÆs shares at A$18.97, about A$0.40 above ThursdayÆs closing price. The AGL offer, meanwhile, prices AlintaÆs shares at A$10.48 each, below AlintaÆs closing price of A$10.70 on Thursday.
Analysts say the only chance Alinta has of recovering amicable discussions with AGL and to win over shareholders is to add a cash component to its bid. AlintaÆs chief executive, Bob Browning, admitted this week that he is exploring the potential of offering some cash to shareholders but that the company cannot afford a full cash bid.
