TransAlta Rips Activists for Share Demand, ‘Dead End’ Coal Idea

(Bloomberg) -- TransAlta Corp. blasted activist investors that are targeting the company, saying they appear to want to push the Canadian electricity generator into a “dead-end” strategy of doubling down on coal-fired power and are making unreasonable demands to receive discounted shares.

Mangrove Partners and an entity controlled by C. John Wilder’s Bluescape Energy Partners LLC asked TransAlta to issue Wilder C$150 million ($113 million) of discounted shares as part of a proposed settlement agreement last month. The company said Monday that was “a demand that no board could reasonably accept.”

TransAlta, which instead agreed to a C$750 million investment from Brookfield Asset Management Inc., said the activists should have accepted its offer to put Wilder and a mutually agreed-upon director on its board. It argued the firms are trying to take control of the board.

“Had the dissidents accepted our offer, Mr. Wilder would have a seat at the Board table,” TransAlta Chairman Gordon Giffin said in a statement. “Instead, they notified the company of their intention to nominate five new directors, which suggests they are seeking the ability to terminate the Brookfield investment and implement the playbook they have used at other companies of selling renewable energy assets and doubling down on coal-fired generation, which is a dead-end strategy and something we will not do."

Asset Sales

TransAlta detailed its interactions with the investors in a regulatory filing Monday, in which it noted that the duo were also seeking the formation of a business review committee chaired by Wilder to explore asset sales and other options as part of its proposal presented to the company. It was also seeking $1.1 million in reimbursement for their investment, it said.

TransAlta’s Brookfield deal includes giving the alternative asset manager two board seats and the ability to convert its investment into an ownership stake in a future subsidiary that would hold its Alberta hydro assets. A third new director, Robert Flexon, would also be appointed to the board, the company said last week.

Mangrove and Bluescape, who collectively hold more than 10 percent of TransAlta, believe there may be better offers in the market than the Brookfield deal. The activist investors had originally sought four seats on TransAlta’s board and wanted the power producer to allow Mangrove and Bluescape to appoint a new a chief operating officer, according to the filing Monday.

Mangrove and Bluescape declined to comment earlier and couldn’t be immediately reached for comment after the statement from TransAlta.

Stock Rally

TransAlta shares gained 76 percent this year through last week, including a 19 percent gain since Mangrove and Bluescape revealed their stake in the company last month. The Calgary-based company’s shares gained 1.4 percent to C$9.96 in Toronto on Monday.

TransAlta said in its filing Monday it didn’t seek a fairness opinion on the Brookfield transaction from its financial adviser because of the “novel structure and features of the investment.” It determined that a such an opinion wouldn’t be warranted because it was in essence a financing transaction and, among other things, was based on the future exchange into equity in a yet-to-be-structured entity for its Alberta hydro assets.

"Any such opinion would be highly qualified, contingent and subject to assumptions lacking any reliable basis upon which it could be rendered with respect to such inherently uncertain and unpredictable future events," TransAlta said in the filing.

To contact the reporters on this story: Kevin Orland in Calgary at korland@bloomberg.net;Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada

©2019 Bloomberg L.P.