It has been a busy few months for TransAlta Corp. (TAC), so shareholders will likely be listening intently to what the company has to say at its annual investor day on Monday, October 6.
After falling below C$31 per share in mid-July, Canada's largest publicly traded electricity producer received a C$7.8-billion takeover offer from two U.S. private equity firms. The C$39 per share bid from LS Power Equity Partners and Global Infrastructure Partners represented a 21% premium to where TransAlta was trading at the time, and it sent the stock above C$38. In early August, the takeover bid that would have seen TransAlta taken private was rejected by the company’s board. Since then, the stock has fallen below C$27.
In September, TransAlta shares got more attention when a subsidiary of Warren Buffett’s Berkshire Hathaway Inc. (BRK.A), MidAmerican Energy Holdings Co., announced that it would buy electricity producer Constellation Energy Group Inc. (CEG) for $4.7-billion. Nuclear reactor operator Electricite de France SA (ECIFF.PK) quickly upped the ante, but was promptly rebuffed. It is still weighing its options with buyout firm KKR & Co., and this, along with the U.S. government’s massive financial bailout plan, is having an impact on TransAlta shares.
“The pending Fed bailout led to support of many takeover stories,” Scotia Capital Analyst Sam Kanes said in a Sept. 22 report. But lining up Berkshire’s deal for Constellation with TransAlta’s situation is like comparing to apples and oranges, he added, suggesting it does not raise the likelihood of a hedge fund takeout. Constellation’s balance sheet and liquidity prompted S&P to say that it it faced an “acute crisis of confidence,” so it needed some help, quickly.
For TransAlta, the attention at least temporarily shifts to its Monday meeting where investors will be looking to management for specifics as to why the board sees value greater than C$39 per share. But if the presentation falls short of expectations, look for “core” shareholders that have supported the company so far to perhaps push for change, RBC Capital Markets analyst Robert Kwan said. In the current weak market, they may be more likely to tender to a takeover bid if one materializes, he told clients on Thursday.