The full takeover joint venture partners for Tilt Renewables Ltd (NZX & ASX: TLT) claimed yesterday they had reached the key milestone of 85% acceptances.
Both Infratil Ltd (NZX & ASX: IFT) and Mercury NZ Ltd (NZX & ASX: MCY) claimed through Infratil chief executive Marko Bogievski that by reaching 85% “a full privatisation becomes almost inevitable in the future.”
“The current JV terminates when the offer ends. But in the future Infratil and Mercury could choose to form a new JV and acquire the shares needed to reach 90% from a small number of institutional investors, or Infratil could creep via a series of purchases once the stand down period required by the Takeovers Code is over.”
Once 90% is reached, we can compulsorily acquire the balance of shares outstanding.”
Infratil said that Tilt Renewables' upcoming share issue for development of the Dundonnell Wind Farm project is a key trigger point. Tilt has announced that it intends to raise up to $A280 million via an accelerated renounceable entitlement offer, or AREO.
Essentially, an AREO is a pro-rata share issue where the rights of shareholders who do not participate in the cash issue are auctioned off to institutional and other professional investors.
“Ordinarily, that sort of share issue can work well for non-participating shareholders”, said Bogoievski, “but this isn’t going to be an ordinary situation.
“Small shareholders should be wary, as there aren’t likely to be many bidders for their rights if they don’t participate in the issue, except perhaps a small number of larger institutional shareholders.
“There’s a very real risk that the shares will be issued at a significant discount to the share price, and that small shareholders will receive little or no value for their rights. If that happens, those shareholders will have the value of their shareholding diluted.”
Infratil yesterday urged minority shareholders to accept the offer now, particularly those who are unlikely to participate in the upcoming equity raise.
The full takeover offer closes this Friday and cannot be extended again.