TransAlta rejects $7.8 billion takeover bid by American hedge funds

07 August 2008

TransAlta Corp., the Calgary-based electricity generating and trading firm that is Canada's largest investor-owned utility, has rejected a $7.8-billion proposal to take the company private by a group of New York-based private equity firms, saying the deal undervalues the company (See: American hedge funds make $7.8 billion bid for Canada's largest power utility)

TransAlta said its board of directors unanimously decided the conditional offer of C$39 a share was too low and that talking to funds LS Power Equity Partners and Global Infrastructure Partners (LSP-GIP) was not in the best interest of the company or its shareholders.

Analysts, however, say TransAlta is likely still in play, either through its own discussions or a revamped, sweetened offer from the New York suitors, who are closely allied with former TransAlta foe and activist investor Luminus Management LLC.

"We respect both LS Power and GIP, but their highly conditional approach fails to recognize TransAlta's fundamental value and growth potential," chairwoman of TransAlta's board Donna Soble Kaufman said in a statement released after markets closed Wednesday.

"Accordingly, the board of directors has determined accepting their invitation to engage in a dialogue about a possible acquisition of the company is not in the best interests of TransAlta and its shareholders," she added.

LS Power and Global Infrastructure, which own 9 per cent of TransAlta's shares, announced their plan to take over the company on 22 July, saying the stock has lagged despite efficient operations and strong finances.