Fortune Favours the Stubborn for Spark

By saying ‘no’ repeatedly, Spark Infrastructure has forced its North American suitors to return with a third and more favourable offer almost 32 cents a security higher than the first ’skinny’ attempt.

The Ontario Teachers’ Pension Plan Board of Canada and the US-based private equity group Kohlberg Kravis Roberts & Co revealed their new, higher offer of $2.95 a security on Wednesday that now values the company at $5.12 billion.

The $2.95-per-security offer compares to the two previous offers – the initial $2.6375 and the follow up $2.7375.

This represents a 26% premium to the closing price of $2.30 on July 13, the day before the first bid.

Spark securities jumped from $2.60 at the close on Tuesday to $2.74 yesterday, a rise of almost 4.5%.

At that level the securities remain well under the new non-binding offer price, even after deducting a final dividend.

Investors are not confident the new price will prove compelling.

Spark told shareholders it was in the company’s interest to continue to engage with the consortium, and granted its suitors non-exclusive due diligence.

Following the announcement of Spark Infrastructure’s first half interim distribution of 6.25 cents, the implied consideration under the new proposal is $2.8875 for each stapled security.

After rejecting the previous offers, Spark left the door open for an improved offer, and provided the consortium with “limited information” on Spark Infrastructure’s business and its prospects.

In Wednesday’s statement to the ASX, Spark made it clear that it was open to approaches if this one failed.

“The Board notes that there is no certainty that the engagement between Spark Infrastructure and the Consortium will result in a control transaction.

“The Board remains focused on maximising securityholder value and will carefully consider any proposal that is consistent with this objective.

“Irrespective of whether the engagement between Spark Infrastructure and the Consortium results in a control transaction, the Board considers that Spark Infrastructure has a high quality and scarce group of regulated assets that have a very attractive future and is well positioned to continue to deliver an attractive yield now with franking credits.

“Complementing its reliable and inflation-linked revenues, Spark Infrastructure’s investment portfolio also has strong growth prospects in its underlying high quality asset base, and has strong ESG credentials given its important role in supporting the multi- decade energy transition to a lower carbon future,” Spark’s statement saying.

The attraction of Spark is its four assets:

49% of SA Power Networks, the sole operator of SA’s electricity distribution network, supplying around 880,000 residential and commercial customers across the State.

49% of CitiPower and Powercor (together known as Victoria Power Networks), distributing electricity to over 1m customers in Melbourne and western Victoria.

15% of TransGrid, the largest high-voltage electricity transmission network in the NEM, connecting generators, distributors and major users in NSW and the ACT, and

100% of the Bomen Solar Farm north of Wagga Wagga in NSW, which is now fully operational and generating in line with expectations, according to the company’s website.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →