Alinta prepares to take on GoliathEmail Print Normal font Large...

Alinta prepares to take on Goliath
Email Print Normal font Large font By Michael Evans
February 22, 2006


Having successfully launched an $888 million raid on 10 per cent of AGL stock on Monday night to force its rival into merger talks, Alinta yesterday unveiled details of the proposal offering 1.773 Alinta shares for each AGL share based on an Alinta share price of $10.97 and AGL price of $19.45.

But with little chance of the AGL board warming to the merger offer ahead of a shareholder vote on its own demerger proposal next month, Alinta - which by yesterday had amassed a 12.9 per cent stake - is preparing a hostile bid for a company three times its size.

Anticipating another rebuff from AGL, Alinta plans to build a stake of up to 19.9 per cent by the time of AGL's shareholder meeting late next month.

With AGL requiring 75 per cent of shareholders to approve its proposal to demerge its energy and infrastructure assets, Alinta expects to be able to scuttle the proposal with a stake of close to 20 per cent, given AGL's large retail shareholder base.

Alinta would then lodge a scrip offer on the same terms as the AGL demerger proposal, allowing shareholders to decide which management they prefer.

Alinta boss Bob Browning said yesterday: "The fact that Alinta has acquired a substantial stake in AGL from institutional investors demonstrates that many in the market believe, as we do, that the combination of Alinta and AGL offers far more value to AGL shareholders than the AGL demerger plan does on its own."

Should its bid succeed, AGL and Alinta could then be demerged into its energy and infrastructure parts, Mr Browning said.

"We think this is taking what they've come up with and advancing it," Mr Browning said. Alinta would not pay any more than $19.45 for AGL shares, he insisted.

The Alinta bid rivals Australia's biggest ever takeover, BHP's $9.2 billion cash takeover of WMC Resources last year.

But having already bought more than $1.1 billion worth in AGL shares by late yesterday, it's understood Alinta, with a market capitalisation of $2.9 billion, may have a joint venture partner up its sleeve to help take a cornerstone stake. Adelaide gas and petroleum company Santos has been named as a possible partner.

Detailing his merger proposal, Mr Browning would not rule out the possibility of a hostile bid.

"It's not our style to do that. They'd be hard-pressed not to sit down and talk to us.

"I just can't fathom a situation where they [the AGL board] don't sit down with us."

AGL said its board "has not yet received a formal proposal from Alinta for review" and would comment "once they have received and had the opportunity to consider Alinta's formal proposal".

Asked about management, Mr Browning said: "I see myself sitting atop that merged entity."

AGL shares rose $1.16 to $19.46. Alinta is suspended.