NEW YORK and DALLAS,
March 29, 2019 /PRNewswire/ - A group
led by Mangrove Partners ("Mangrove") and Bluescape Energy
Partners ("Bluescape"), together one of the largest
shareholders of TransAlta Corporation ("TransAlta" or the
"Company") (TSX:TA) (NYSE:TAC) with aggregate ownership of
10.1% of the Company's outstanding shares, today raised significant
questions about the Company's decision to accept a large investment
from Brookfield Renewable Partners ("Brookfield"), including about the rushed
process coinciding with the proxy nomination deadline, the
favorable valuation and terms given to Brookfield, and the deal's implications for
the future accountability of TransAlta's Board and management
to shareholders.
Nathaniel August, President and
Portfolio Manager at Mangrove Partners, said, "TransAlta's
announcement and subsequent disclosures of the Brookfield investment leave many important
questions unanswered. Most critically, is it the best deal
for TransAlta shareholders or are there potentially superior
transactions available? We call on TransAlta's CEO, who has
enthusiastically promoted the deal's benefits, to be more
forthcoming about its rationale and the process undertaken to
ensure TransAlta achieves the best outcome for all
shareholders. Until then, we have submitted a notice under
the Company's by-laws that we intend to nominate five candidates
for election to the Board at the upcoming annual meeting. If
at least two are elected, the Company has the option to terminate
the Brookfield Investment under the terms of the agreement.
Let me be clear: our goal is not to stop this transaction, but
rather to ensure that the Company retains the option to pursue or
renegotiate a better one."
Key questions raised by Mangrove and Bluescape include:
- Given that only two business days passed between the signing of
the confidentiality agreement (when a competitive process normally
begins) and execution of the investment agreement with Brookfield, how could the Company have
rigorously demonstrated the value of the assets and negotiated the
best deal for the Company?
- To what extent did the Company conduct a broadly marketed
process to determine the fair market value for the hydroelectric
assets before engaging in confidential discussions with
Brookfield?
- How did the TransAlta Board determine to give Brookfield the option to buy up to 49% of the
Company's Alberta hydroelectric
assets for 13x EBITDA, less $10mm capex, when
Brookfield told its own investors
only last October: "When you see merchant hydro trade today it's
generally trading at 20x to 20x+."
- Why is Brookfield's investment
split into debt and preferred equity – both priced with larger
coupons than TransAlta's unsecured debt, despite the option to
convert to equity – instead of being structured as common equity,
so that Brookfield is aligned with
TransAlta's shareholders?
- Knowing that no other major shareholder has even a single Board
seat, why was Brookfield granted
two seats on the Board, despite the fact that its interest in the
Company is primarily in the form of debt and preferred equity and
thus not aligned with TransAlta shareholders generally?
- By imposing a 36-month standstill that runs through the
Company's 2022 annual shareholders meeting and giving management
control over the voting of Brookfield's common shares on all matters,
does this agreement not make TransAlta leadership even less
accountable to shareholders?
C. John Wilder, Executive
Chairman, Bluescape Group, added, "Brookfield are astute investors that excel in
purchasing assets below true value for the benefit of their
shareholders, not the other side's. We acknowledge that
adding the Brookfield nominees to
the board would bring greatly needed industry
expertise. But at what cost? Until the Company provides
more details, we believe all shareholders have reason to question
the financial costs of this deal, as well as its potential to
further entrench and protect the current TransAlta Board from being
accountable to its shareholders."
About Mangrove Partners
Mangrove Partners is a value-oriented investment manager founded
in 2010. Mangrove's investment objective is to organically compound
net worth while minimizing the chances of a permanent loss of
capital.
About Bluescape Energy Partners
Bluescape Energy Partners is a value-oriented energy investment
company that follows a value-driven philosophy. Bluescape's
experience in energy principal investing, as investor and asset
manager, spans market cycles and captures every level of the
capital structure. Its investing team leverages its deep knowledge,
and extensive industry relationships to pursue investment
opportunities across all dimensions of the energy value chain.
Bluescape seeks to create long term value through rigorous asset
management and a disciplined risk return mindset.
Forward-Looking Statements
Certain statements and information contained herein constitute
"forward-looking information" and/or "forward-looking statements"
within the meaning of applicable securities laws (collectively, the
"forward-looking statements"). All statements and
information, other than statements of historical fact, included
herein are forward-looking statements. Forward-looking statements
can be identified by the use of words such as "may", "would",
"could", "should", "potential", "will", "seek", "expect", "intend",
"plan", "estimate", "anticipate", "believe", "continue" or similar
words and expressions or the negative thereof. There can be no
assurance that the plans, intentions or expectations upon which
these forward-looking statements are based will occur or, even if
they do occur, will result in the performance, events or results
expected. We caution readers not to place undue reliance on
forward-looking statements contained herein, which are not a
guarantee of performance, events or results and are subject to a
number of risks, uncertainties and other factors that could cause
actual performance, events or results to differ materially from
those expressed or implied by such forward-looking statements.
These factors include: changes in TransAlta's strategies, plans or
prospects; general economic, industry, business, regulatory and
market conditions; actions of TransAlta and its subsidiaries
or competitors; conditions in the energy industry; risks relating
to government regulation and changes thereto; the state of the
economy including general economic conditions globally and economic
conditions in the jurisdictions in which TransAlta operates; the
unpredictability and volatility of TransAlta's share price; the
interest of third parties in potential transactions with
TransAlta that would be alternatives to the Brookfield investment; changes in commodity
prices and tax rates and government regulation of carbon
emissions; and currency fluctuations. These factors should not be
construed as exhaustive. Shareholders are cautioned that all
forward-looking statements involve known and unknown risks and
uncertainties, including those risks and uncertainties detailed in
the continuous disclosure and other filings of TransAlta and
certain members of TransAlta's industry and other noted peer
groups with applicable securities regulators, copies of which are
available on SEDAR at www.sedar.com or on the Electronic Data
Gathering, Analysis, and Retrieval at www.sec.gov. We urge you to
carefully consider those risks and uncertainties. The
forward-looking statements contained herein are expressly qualified
in their entirety by this cautionary statement. Mangrove and
Bluescape do not assume responsibility for the accuracy or
completeness of the forward-looking statements. The forward-looking
statements included herein are made as of the date of press
release and Mangrove and Bluescape undertake no obligation to
publicly update or revise such forward-looking statements, except
as required by applicable law.
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SOURCE Mangrove Partners