Hong Kong jewellery and property conglomerate Chow Tai Fook Enterprises has taken its first plunge into the Australian energy sector, snapping up Alinta Energy in a circa $4 billion deal and pre-empting its IPO plans.
The deal, first reported by Street Talk, will see the Hong Kong player take over the business 100 per cent as is, including the existing management team led by chief executive Jeff Dimery.
The new buyer, which has yet to get foreign investment approval for the takeover, is prepared to invest in Alinta and allow it to both grow its retailing and generation business, Mr Dimery said.
CTFE "will retain the existing Alinta Energy senior management team and grow its business by pursuing appropriate investment opportunities in the Australian energy market as they arise," the company, controlled by the Cheng Family, said in a statement.
Alinta, owned by a group of private equity and hedge funds led by TPG, was heading down the path of a public float, with a prospectus expected to be released on Thursday before a last-minute delay.
The IPO was itself a "Plan B" after an original trade sale process was scrapped after interest from AGL Energy and China's Huadian failed to develop into an offer that was acceptable to Alinta's shareholders.
'Superior outcome'
Mr Dimery said that after getting feedback from fund managers canvassed on the IPO, it became obvious that the sale to CTFE "was going to be the superior outcome."
"At the end of the day we felt on indications of the price range that the true value of the company wasn't being reflected in what was being fed back to us and a trade sale looked more attractive," Mr Dimery told The Australian Financial Review.
CTFE, which controls blue chip Hong Kong conglomerate New World Devlopment Co., has only relatively small interests so far in the energy sector, comprising about 2500 megawatts of power plants in China.
It has investments in more than 50 countries across Asia, Europe and the Americas, including holdings in tech startups including Snapchat, Spotify, Uber and Airbnb.
In Australia, Alinta will be the group's first significant investment outside of real estate and resorts. CTFE is part of the consortium building a $3 billion Brisbane casino resort.
CTFE said it has already lodged a submission on the deal with the Foreign Investment Review Board and it wouldn't comment further until the transaction completed.
FIRB approval for Chinese-linked bidders for energy assets has become more uncertain since last year's rejection of a Chinese and Hong Kong-based bidder for NSW distributor Ausgrid, but Alinta assets are expected to raise fewer concerns than Ausgrid. China Huadian had secured FIRB approval for its tilt at Alinta before it withdrew from the process.
Mr Dimery said CTFE will put in place a local board for Alinta to sit above the organisation and work with him and his senior team.
"They expect me to deliver on the strategic plan that we presented to them," he said.
Business as usual
That plan includes defending and growing Alinta's strong position in Western Australian energy retailing amid a pick-up in competition given plans by AGL Energy and Origin Energy to expand into WA retailing.
It also involves expanding in power generation for industrial customers in the Pilbara region, more than doubling Alinta's east coast retailing market share, and strengthening the vertical integration of the company's position in energy supply through investments in thermal power plants and renewable energy.
Mr Dimery said Alinta had been progressing towards becoming an investment-grade company as part of the IPO plan and that would continue. However plans for a refinancing have been put on hold pending discussions with the new owners.
He said Alinta's customers should initially see no difference under the new owners, but they should benefit in the longer term as investments were made.
"They are committed to ensuring the energy needs of Alinta's customers continue to be met and intend to grow the business by pursuing value accretive investment opportunities in the Australian energy market as they arise," Alinta said in a formal statement.
