Nov. 29, 2000 (Daily Deal)–In the battle over Chilean electricity producer Gener SA , AES Corp. held out an olive branch to rival bidder TotalFinaElf SA , and the French energy giant grabbed it.
The Arlington, Va.-based power plant developer said Tuesday it had agreed to sell Gener’s Argentine electricity generation and transmission assets to TotalFinaElf for $652 million in cash and assumed debt if it succeeds in purchasing Gener.
That success depends not only on approval by Gener shareholders, but also on their lifting of a company bylaw that stipulates that no single investor or group can own more than 20% of the company.
Voting to remove that cap is scheduled for Dec. 12.
AES’ offer to TotalFinaElf appears to work for both sides. AES gets control of Chile’s second-largest power producer, and TotalFinaElf gets the Argentine power assets that aroused its interest when it bid on the company Oct. 22.
“The agreement with TotalFinaElf puts the interests of shareholders and other stakeholders and all the parties in the best possible position,” said Naveed Ismail, president of AES Andes.
“For AES, the transaction would permit Gener to increase the focus on Chile, its most important market, and makes sense for AES due to existing business concentration in Argentina.
“For Gener, it improves the risk profile of its activities and reduces substantially its consolidated indebtedness. The agreement also gives TotalFinaElf the opportunity to participate in the Argentine assets originally sought from Gener.”
Neither Gener nor TotalFinaElf could be reached for comment.
In addition to customary conditions, AES said the sale of Gener’s Argentine assets would be subject to due diligence by TotalFinaElf.
On Oct. 22, TotalFinaElf, the world’s fourth-largest oil company, said it would buy a 20% stake in Gener, totaling $360 million, through a capital increase as well as 80% of the company’s shares in Argentina for $450 million.
The two companies also discussed a strategic alliance calling for the generation, transmission and commercialization of electric energy in Latin America, focusing first on Argentina, Brazil, Chile and Colombia.
But on Nov. 3, AES offered to purchase all outstanding Gener American depositary shares (ADS) in the U.S. for AES common stock having a value of $16 per ADS and 3.46 billion Gener shares in Chile at the Chilean peso equivalent price per share in cash.
The move was in character for AES. The company has been on an acquisition tear in Latin America, acquiring assets in Bolivia, Brazil, Argentina, El Salvador and Venezuela over the last year.
Strengthening AES’ bid was the support of Gener’s largest shareholder, Chilean oil and forestry conglomerate Copec , which agreed to sell its 19.73% stake in AES’ tender offer.
Last week, Gener announced it had suspended its agreement to form a venture with TotalFinaElf and canceled a shareholders’ meeting scheduled for yesterday to vote on TotalFinaElf’s offer.
AES also announced last week it had waived the tentative financing condition in its offer, saying it would be able to fund the acquisition through various sources, including project borrowings and issuances of debt, equity and convertible securities by AES and its subsidiaries.
Deutsche Bank Alex. Brown is advising AES, while Gener is being assisted by UBS Warburg and TotalFinaElf by Credit Suisse First Boston .
Claire Poole is a reporter for The Daily Deal in Houston. She can be reached at: (713) 663-6533 or mailto:email@example.comThe Deal.com: Charting the Deal Economy. Definitive information for the M&A, VC, private equity and IPO community.
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