Continuous Disclosure: Will AustralianSuper’s Infratil play unleash Trustpower?

The price action in Tilt Renewables has revealed a strong appetite for sustainable electricity generation assets.

When its majority owner Infratil announced that its stake in the Australasian wind and solar power generator was under review, Tilt’s share price rocketed from $3.92 to $5.60.

Then came this week’s surprise offer from AustralianSuper for all of Infratil at $7.43 a share, valuing the infrastructure investor at $5.4 billion.

Part of the deal would see Infratil’s 51 per cent stake in Tauranga-based Trustpower spun out via a distribution to Infratil shareholders.

If nothing else, the move would improve the liquidity in Trustpower’s shares, which have lagged the other power generator/retailers over the past year.

Ironically, Tilt was originally part of Trustpower before it was de-merged in October 2016.

That deal saw Tilt take ownership of all Trustpower’s operational wind assets, and the wind and solar development pipeline.

Tauranga-based Trustpower retained all the hydro-electricity generation assets – 38 power stations – and the retail business.

Trustpower unleashed

Trustpower – which has for several years been majority-owned by Infratil – would be unshackled by its exit, fund managers said.

Without Infratil’s blocking stake, could Trustpower itself become a takeover target?

“The fact that AustralianSuper wants to do an in specie distribution suggests that they don’t really have an interest in Trustpower,” said Craigs Investment Partners head of private wealth research Mark Lister.

“They are essentially just giving that back to Infratil shareholders.”

If the proposal goes ahead, Trustpower would end up still being listed on the NZX, but without Infratil as a major shareholder.

“There will be much more liquidity in the stock and a much wider base of shareholders, and they would not be beholden to a major shareholder,” Lister said.

Without Infratil, Trustpower would be able to spend more on growth, rather than paying out all its earnings in dividends.

“I would see it as a net positive for them if it goes ahead, but that’s a big ‘if’ because $7.43 for Infratil is not going to get them across the line,” Lister said.

Power play

Fisher Funds portfolio manager Sam Dickie agreed the proposal could end up being positive for Trustpower because of the potential removal of Infratil’s blocking stake and restoration of a takeover premium.

“People have for years talked about consolidation in the gentailer sector,” he said.

“Trustpower, being one of the smaller ones, would be a potential takeover candidate if it was not for Infratil’s blocking 51 per cent stake.

“Trustpower has had a bit of a value cap on it,” said Dickie.

Trustpower shares have roared ahead on the week’s developments – at $8.05, the stock is at its highest point since July last year.

“What the stock market is saying is that if Trustpower is freed up, it will increase liquidity and potentially put the company in play,” Dickie said.

Rural Land offer to close

New Zealand Rural Land Co’s (NZRLC) initial public offer is set to close tomorrow (Saturday) after an extensive advertising campaign.

The company is expected to list next Friday.

The offer aims to raise $75 million to $150m, which NZRLC plans to invest in agricultural land, specifically highly-indebted dairy properties.

NZRLC, which is chaired by Rob Campbell, said it would be an agricultural sector landlord only, leasing rural land to experienced tenants under long-term leases. The offer is pitched at $1.25 a share.

Origin Capital's IPO

An Origin Capital Partners IPO aimed at raising funds to invest in kiwifruit orchards has passed its first hurdle, raising more than $50m.

The next goal is to hit $100m, which is to be used to buy existing kiwifruit orchards or for the establishment of new ones, focusing exclusively on the Sungold kiwifruit variety.

About 60 per cent of Origin Capital Partners’ portfolio will be weighted towards the Bay of Plenty.

Investment banker Dominic Jones said the fund would initially aim to acquire 10 to 15 assets.

Jones said Origin Capital had already bought three properties – two of which are producing orchards – which will be harvested from March.

“From a fundraising perspective, it’s all gone pretty well,” he said.

Origin has appointed Kim Wallace, whose background is in dairy sector management, as an independent director.

The company is chaired by Simon Botherway, the co-founder of Brook Asset Management, who also serves on the board of NZX-listed Serko.

Jones said there were no immediate plans for an NZX listing but that one could be considered in the future.

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