Seneca Capital Urges TransAlta Board to Immediately Explore Strategic Options to Maximize Shareholder Value
July 22 2008 - 3:36PM
PR Newswire (US)
Recommends Pursuing Plan of Action in Response to Acquisition
Proposal and Under-Valued Stock NEW YORK, July 22 /PRNewswire/ --
Seneca Capital today sent the following letter to the Special
Committee of the Board of Directors of TransAlta Corporation (TSX:
TA; NYSE: TAC), urging them to immediately review alternatives to
maximize shareholder value, including but not limited to an auction
for sale of the company, a strategic partnership or a restructuring
of the company's long-term power contracts, to unlock the company's
substantial unrealized value for all shareholders. Seneca also
urges the Board to pursue better alignment of the company's
management compensation with its North American peers. The letter
in part states: Dear Special Committee: Following the July 21, 2008
public proposal by LS Power Equity Partners and Global
Infrastructure Partners to acquire the company for Cdn $39/share,
we are writing as a substantial shareholder of the company to urge
you to begin an immediate and expedited review of strategic
alternatives available to the company to maximize value for all
shareholders. We envision that such alternatives may include but
are not limited to an auction for sale of the company, a strategic
partnership or a restructuring of the company's long-term power
contracts. We believe that the July 21st proposal and the continued
disconnect between the company's share price and intrinsic value,
clearly demonstrate that the status quo is not a viable option.
Over the past several years, Seneca has monitored closely the
activities of TransAlta and its peers and we have been a holder of
the company's shares for a substantial period of time. Based upon
our investment experience, particularly within the energy sector,
we believe that a gap currently exists between the fundamental
value of TransAlta's assets and its stock price. In our opinion,
the stock market does not properly account for the fact that over
40% of the company's generation output is currently committed under
long-term contracts in Alberta at prices (estimated to be $30/mwh)
that are substantially below market price (estimated to be
$80/mwh). As those contracts roll off, the future cash flows of the
company could be expected to increase dramatically. We also believe
the market does not appreciate the current cash generating
capability of the business due to a mismatch between earnings and
recurring free cash flow per share. Following on the impetus of the
LS Power/Global Infrastructure proposal, the Special Committee
should -- consistent with the Board's fiduciary duties to
shareholders -- act immediately to review alternatives to maximize
shareholder value and unlock the company's substantial unrealized
value for all of the company's shareholders. As part of its
strategic review, the Special Committee should engage a globally
recognized independent financial advisor with the mandate to
explore a range of strategic alternatives and then act
expeditiously to execute the optimal strategic path. We also urge
the Board to immediately pursue better aligning the company's
management compensation with the interests of shareholders by
employing a compensation scheme that is more comparable to those of
the company's North American independent power producer peers,
including but not limited to the addition of stock option grants.
We believe it is crucial for shareholders, particularly at a time
such as this, that management be appropriately and adequately
incented to create shareholder value. About Seneca Capital Seneca
Capital is an investment fund headquartered in New York. The fund,
founded in 1996, maintains a broad array of value-focused
investments across industries, geographies and capital structures.
Seneca maintains a team of professionals that focus primarily on
energy and commodity related industries. Seneca has a successful
track record making concentrated, longer-term investments in
companies such as TransAlta. DATASOURCE: Seneca Capital CONTACT:
Allyson Morris of The Abernathy MacGregor Group for Seneca Capital,
+1-212-371-5999
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