The Spark Infrastructure Group (ASX: SKI) share price rose and was halted on news of a takeover bid for the infrastructure business.
Spark is an energy infrastructure business, delivering electricity to over 5 million homes and businesses. For example, it owns 49% of businesses that distribute electricity to over 1 million customers in Melbourne and western Victoria.
Takeover bid for Spark Infrastructure
Spark said it had received a conditional and non-binding takeover bid from Ontario Teachers’ Pension Plan Board (OTPP) and the private equity group KKR.
Under the first takeover offer, Spark shareholders would get $2.70 cash per share, which would be reduced by any dividends paid. Taking into account the FY21 first half distribution, that means the offer is actually now $2.6375 per share.
After thinking about it and consulting with advisers, the Spark board concluded that the offer undervalued Spark and was not at a level which Spark would grant access to due diligence.
Subsequent to that, Spark then received a higher offer from the consortium on the same basis as the initial proposal, but the cash offer was increased to $2.80 per share, but reduced for the interim distribution – so that offer is actually $2.7375 per share.
That higher offer was subject to conditions like due diligence, Foreign Investment Review Board approval and approval by the leadership of Spark, KKR and OTPP.
Another rejection
Spark said this offer also undervalued Spark and still didn’t grant access to due diligence.
But in order to be constructive, the board said it was prepared to provide limited information on its business and prospects. That would only happen on the signing of a confidentiality agreement.
Spark said there is no certainty that an improved offer will come from this.
The board also said that regardless of further proposal, it believes that Spark has a highly attractive future and is well positioned to continue to deliver an attractive yield now with franking credits couple with strong growth 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.
Summary thoughts on Spark and the share price
If I were a shareholder, I’d be happy that the share price is going higher.
It also announced plans today to develop a renewable energy generation and storage hub in southwest NSW for up to 2.5GW after the securing of lease options over land in the region. This will involve a hybrid wind, solar and battery storage project.
Spark is a solid business, but there are other ASX dividend shares I’d rather buy after Spark’s strong performance after the takeover offer.
