Wednesday, January 10, 2007

Alinta Buyout commentary

Well the Alinta Ltd (ASX:AAN) buy out announcement has really stirred a heap of news in the media.

The Australian Financial Review carried 4 stories devoted to the news. A summary is below :

Senior management of Australian energy company, Alinta, have proposed a buyout. CEO Bob Browning, chairman John Poynton and three other executives have the backing of Australian investment bank, Macquarie Bank, for the buyout proposal. The team claims that the plan will give Alinta shareholders a significant premium. A lack of detail has not affected the positive reception of a management buyout proposal for Alinta. The structure of the proposal to buy the Australian energy company has not yet been revealed. However, a significant premium has been promised to shareholders. It is not clear how this would be achieved, as it is thought that the deal could possibly be a combination of cash and shares. The offer would The proposal pushed Alinta's share price to a high of $A12.77 on 9 January 2007. have to value the company at over $A6 billion in order to be really attractive. The proposal pushed Alinta's share price to a high of $A12.77 on 9 January 2007. The share price closed up by $A1.42 at $A12.63, giving the company a market capitalisation of $A6.2 billion.

They also raised the issue on the controversial style of the CEO with the following two article :

The CEO of Alinta has overseen its growth to a $A6 billion national company over his six years of leadership. The American gained experience at US companies. He gained a reputation for controversial deals, after masterminding Alinta's acquisition of the assets of Duke Energy in 2004. His takeover of AGL also caused his strategy to be questioned. His involvement in the management buyout creates a conflict of interest.

The timing of a management buyout proposal for Australian energy company, Alinta, is awkward. The proposal was presented by chairman John Poynton, CEO Bob Browning and three executives, with Macquarie Bank. Alinta has been involved in acquisitions as it pursues a strategy to move to an asset management and infrastructure business. There are concerns about the involvement of Browning, as well as the involvement of Macquarie Bank. Investors feel that the recent changes to the company make it difficult for them to assess its value

Its an interesting proposition at the moment with all of the takeovers and mergers that have suddenly occured on the market. It is very hard not to have a profitable year when you catch one or two of these deals.

As far as Alinta I own a few but not nothing to write home about. I bought them years ago and expect this will see the end of our relationship together. They are currently overpriced and this will shoot them up even further out of an acceptable range.

Good Luck if you own them.

Good Luck Investing

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