LS Power and GIP in C$7.7bn energy play(2)

The two funds have offered to buy all outstanding shares of TransAlta, a Canadian energy company that recently sold assets to an AIG- and Teachers’ Private Capital-backed portfolio company.

LS Power Equity Partners and Global Infrastructure Partners hope to take private Canada’s TransAlta in a C$7.7 billion ($7.7 billion; €4.9 billion) all-cash transaction.

The two have offered to purchase all outstanding common stock at C$39 per share, a 21 percent premium over the energy company’s closing price on 18 July.

In February, TransAlta sold two Mexican power plants to InterGen, a global power generation company jointly owned by AIG Highstar Capital and the Ontario Teachers’ Pension Plan, in a $304 million transaction.

LS Power, a private equity affiliate of New York-based hedge fund Luminus Management, currently owns some 9 percent of TransAlta’s stock and is its largest shareholder.

The proposed deal would include a $6 billion equity cheque. This will be supplemented by $2 billion in debt provided by Credit Suisse, which will also provide a $1.5 billion backstop credit facility if needed to refinance TransAlta’s existing commercial bank facility and $500 million in recently issued senior notes, according to the firms’ offer letter.

LS Power and GIP said they are committed to working with the company’s board and completing a consensual transaction.

“In a private company structure, with owners taking a long-term view, TransAlta and its leadership would have significant flexibility in making strategic investments and plans that benefit stakeholders,” according to a statement from LS Power and GIP.

GIP, which in May closed a $5.6 billion infrastructure fund, is based in Stamford, Connecticut and was founded with funds from Credit Suisse and General Electric.

Last year LS Power closed its second energy fund on $3.1 billion.