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Infratil tries to gee up Tilt acceptances

With two days to go before its takeover offer for Tilt Renewables expires, and at least 85 percent of shares under its belt, Infratil says full privatisation is “almost inevitable”.

Infratil is also warning shareholders who don’t wish to participate in Tilt’s upcoming A$280 million rights issue that if Infratil doesn’t get to 90 percent acceptances, the value of their rights could end up selling at a significant discount.

Infratil's $2.30 per share offer values Tilt at almost $720 million, a price the Melbourne-based generation developer's independent directors have repeatedly said is too low and “opportunistic.” The Wellington-based investor made the offer in mid-August after forming a joint venture with Mercury NZ that restricts Mercury’s stake in Tilt to 20 percent.

Mercury had bought its stake from the Tauranga Electricity Energy Consumer Trust and the JV and takeover bid allowed Infratil to buy TECT’s remaining 6.8 percent of Tilt, taking the combined Infratil/Mercury stakes to 77.8 percent.

Infratil last extended its offer on November 14 when it had received 84.4 percent acceptances.

“Now we have reached 85 percent, a full privatisation becomes almost inevitable in the future,” Infratil chief executive Marko Bogoievski says in a statement.

“The current JV terminates when the offer ends. But in the future, Infratil and Mercury could choose to form a new JV and acquire the shares needed to reach 90 percent from a small number of institutional investors, or Infratil could creep via a series of purchases once the stand-down period required by the Takeovers Code is over,” Bogoievski says.

The code stipulates a 12-month stand-down period before a company can start using the creep provisions but there’s no stand-down period if Infratil or a renewed JV wants to launch another takeover offer.

“Once 90 percent is reached, we can compulsorily acquire the balance of shares outstanding,” Bogoievski says.

Infratil remains liable for Tilt’s costs in dealing with the takeover offer, although that becomes moot if it receives more than 90 percent acceptances.

Bogoievski says that ordinarily a rights issue of the nature Tilt is planning to help finance the proposed its 336 MW Dundonnell wind farm in Victoria can work out well for shareholders who don’t wish to stump up fresh capital.

“But this isn’t going to be an ordinary situation. Small shareholders should be wary as there aren’t likely to be many bidders for their rights if they don’t participate in the issue,” he says.

“There’s a very real risk that the shares will be issued at a significant discount to the share price and that small shareholders will receive little or no value for their rights. If that happens, those shareholders will have the value of their shareholding diluted.

“Infratil urges minority shareholders to accept the offer now, particularly those who are unlikely to participate in the upcoming equity raise.”

Tilt shares rose one cent to $2.32 today.

Infratil’s offer closes on Friday.

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