TransAlta bids $654M for Canadian Hydro Developers

Shares of Canadian Hydro Developers jumped34 per cent Monday after TransAlta Corp. announced that it plans to make a $654-million hostile takeover bid for the Calgary-based energy company.

TransAlta said it tried to negotiate a friendly takeover and launched talks between the two companies last December, but failed to persuade Canadian Hydro to accept its offer.

"Despite TransAlta's efforts, it became clear that a negotiated transaction could not be achieved," the Calgary-based power producer said in a release. "As a result, TransAlta felt compelled to make this offer directly to Canadian Hydro Developers' shareholders."

TransAlta said the all-cash offer, which it plans to make Wednesday, is a premium of about 30 per cent to the average trading price of Canadian Hydro Developers common shares on the TSX for the last 10 trading days.

"This offer provides Canadian Hydro Developers shareholders with significant, immediate and certain value for the company's existing assets, as well as its future growth potential," TransAlta CEO Steve Snyder said.

"We have great respect for the company and its employees, and believe our respective shareholders and other stakeholders would be very well-served by the combination of these two great Alberta-based businesses." he said.

Deal would boost renewable energy capacity

TransAlta operates mainly coal and gas-fired power plants, as well as some renewable energy facilities, in Canada, the U.S. and Australia.

Canadian Hydro Developers operates 694 megawatts of wind, hydro and biomass power plants in Alberta, Ontario, Quebec and British Columbia. It also has 252 megawatts of of advanced development projects in western and eastern Canada.

On a combined basis, TransAlta and Canadian Hydro would have net generation capacity of 8,657 megawatts in operation. The renewables portfolio would include 1,900 megawatts, or 22 per cent of the combined portfolio.

"For TransAlta, this transaction accelerates our current strategy and extends our leadership position to become the largest publicly traded provider of renewable energy in Canada," Snyder said.

"We believe the combination of Canadian Hydro Developers' portfolio and our operational and development capabilities and strong balance sheet, creates a company well-positioned to succeed in a world in which both capital and carbon are constrained," he said.

TransAlta said the transaction will be funded initially with new credit from the the Royal Bank of Canada and later with issues of corporate debt and between $200 million and $300 million of new equity.

The company said the offer will expire Aug. 27 and is subject to certain conditions, including acceptance by at least two-thirds of Canadian Hydro's common shareholders and necessary regulator approvals.

Shares of TransAlta fell21 cents to $20.80 on the TSX.