Infigen Energy Limited

 

IFN Details
 
Takeover Bid by Iberdrola:Infigen Energy Limited (ASX: IFN) provides Australian businesses with reliable and competitively priced clean energy, generated from its own fleet of wind farms or its portfolio of contracted assets.

Announcement by Iberdrola: Iberdrola Renewables Australia Pty Ltd, one of the world’s leading electricity utilities group by market capitalisation, recently made a takeover bid for Infigen Energy Limited and Infigen Energy Trust. Both the parties have now signed an implementation agreement, under which Iberdrola has made a cash takeover offer of $0.86 per stapled security for all Infigen securities, representing a 7.5% premium on the offer of 80 cents per share, issued by UAC Energy Holdings Pty Ltd. Infigen provides an attractive platform to Iberdrola for future growth and will consolidate its presence in the attractive Australian renewable energy market. The transaction is aligned with the company’s strategy to reach a total renewable installed capacity of 33 GW. 

In 2019, Infigen Energy reported EBITDA and net income amounting to $165.3 million and $40.9 million, respectively, which is expected to be accretive to Iberdrola’s group earnings from the first year onwards. The Offer, implying a diluted equity value of $840.6 million for Infigen Energy Limited, has been unanimously recommended by Infigen Energy’s Board in the absence of a superior proposal. Iberdrola and Infigen’s largest security holders, TCI funds, have signed a pre-bid agreement to sell 20% of Infigen Staples Securities to the former no earlier than two months after the commencement of the offer, subject to Foreign Investment Review Board (FIRB) approval and no superior proposal being made. Moreover, the securities can be issued earlier if TCI Funds’ acceptance would result in Iberdrola having a relevant interest in over 50% of Infigen Stapled Securities.
Conditions to the Offer: The bid by Iberdrola is subject to FIRB’s approval under the Foreign Acquisitions and Takeover Act. Execution of the deal will be put on hold on the occurrence of a material adverse event which can lead to a 15% or a greater reduction in Infigen’s Net Tangible Assets or EBITDA to 30^th June 2020 or a 20% or greater reduction in expected EBITDA for FY21 or FY22. Another key condition to the offer includes Iberdrola achieving a relevant interest in >50% of Infigen’s outstanding securities on a fully diluted basis.

UAC Energy’s Bid Stands Rejected: In an announcement released on 17^th June 2020, the Board unanimously recommended the investors to reject the offer by UAC Energy Holdings Pty Ltd, which was put on hold for assessment. The company will be sharing further details on this recommendation in the week ending 26^th June 2020.

No Distribution for H2FY20: Infigen Energy Limited recently released an announcement stating that it will not be paying a distribution for H2FY20 ending 30^th June 2020, lowering the conditionality of the takeover bids by Iberdrola Renewables Australia Pty Ltd and UAC Energy Holdings Pty Ltd, and providing more certainty for security holders.

During May 2020, the company sold 154 GWh of total renewable energy generation, in line with the prior corresponding period.

Production Highlights – May’20 (Source: Company Reports)
 
Valuation Methodology:EV/Sales Multiple Based Relative Valuation (Illustrative)
 

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of the company gave positive returns of 46.43% in the last one month and is currently trading close to its 52-week high level of $0.90. The Board of the company has recommended shareholders to vote in favour of the takeover bid by Iberdrola. However, execution of the transaction is subject to certain conditions, as stated in the above section. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a price correction of high single-digit (in % terms). Hence, we suggest investors to book profit and recommend a “Sell” rating on the stock at the current market price of $0.880, up 7.317% on 17^th June 2020.

 
IFN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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