After a tortuous six days of negotiations, the Singapore Government and three different Babcock & Brown vehicles have emerged victorious over Macquarie Bank’s management-backed offer for energy giant Alinta.

Alinta shareholders are predicted to get $15 a share in value plus a 40c fully franked dividend, but almost half of this will be through the issue of four different pieces of paper as follows:

  • $8.50 in cash per Alinta share in cash, totalling $4.2 billion.
  • 7.83 Babcock & Brown Infrastructure securities for every 5 Alinta shares.
  • 3.31 Babcock & Brown Power securities for every 5 Alinta shares.
  • 1.3 Babcock & Brown Wind securities for every 5 Alinta shares.
  • 1.51 Australian Pipeline Trust units for every 5 Alinta shares.

In what is an extraordinarily complex $8 billion takeover bid, the Singapore Government is shelling out almost $2 billion in cash for a range of assets, some of which will be on-passed to its listed Australian offshoot SP Ausnet.

  • Tasmania Gas Pipeline (100%)
  • AlintaGas Networks (74.1%)
  • Multinet Gas (20.1%)
  • Dampier to Bunbury Natural Gas Pipeline (up to 20%)
  • WA-based services and maintenance business.

BBI units tumbled 5.5c to $1.775 this morning meaning that institutions who recently took up a $422 million placement at $1.80 are now underwater. This is always the fear with Babcock and Macquarie Bank – that the parent companies will generate huge fees whilst shuffling assets into the satellite vehicles at inflated prices.

The same goes for Babcock & Brown Power which is shelling out $2.6 billion through $1.64 billion in debt and the issue of 331 million new shares to Alinta shareholders in exchange for its portfolio of six small power stations that generate 970mW of electricity and 67% of the WA retail business.

However, the deal triggers a shotgun arrangement whereby AGL Energy names the price and BB Power has to decide whether to sell its 67% stake of the WA retail business or buy AGL’s 33% stake. BB Power shares fell 7c to $2.81 this morning, but remain above last year’s float price of $2.50.

Babcock & Brown Wind Partners has bought the Wattle Point wind farm on South Australia’s Yorke Peninsula for $9.5 million in cash and the issue of 130 million units’ worth. The units are steady at $1.755 this afternoon.

The Babcock consortium hasn’t made the same mistake as Airline Partners Australia and is going for a board-endorsed scheme of arrangement that only requires approval from 75% of shares voted. There’s a controversial $37.5 million break-fee if someone comes over the top.

An independent expert report is required and the market is sceptical about the $15-a-share valuation as Alinta shares only gained 7c to $14.22 in afternoon trading.

The biggest winner is Babcock & Brown which is up $1.19 to $27.59, as the market value of the ticket clipping machine soared $340 million to $7.84 billion. The specific fees have not been disclosed.

Perhaps it’s too embarrassing.

Peter Fray

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