Directors of Canadian Hydro urge shareholders to reject TransAlta bid
The board characterized as being inadequate for a number of reasons, including that it did not reflect the value of Canadian Hydro's development pipeline, the future value of carbon credits and renewable energy credits, and the value of the company's tax assets. Significantly, the $654 million cash offer is well below the company's market capitalization (which at the time of posting was $725 million, according to Google Finance).
The board also described the offer as being opportunistic. Kent Brown, Chief Executive Officer of Canadian Hydro, had this to say:
"We're at a key inflection point in our Company's 20-year history as we begin to reap the financial rewards of our significant development investments. We are well positioned financially to weather the current economic downturn and to capitalize on future growth opportunities. This offer does not represent compelling value, and we believe we can do better for our Company and our shareholders through any one of a number of alternatives."
More in-depth support for the board's recommendations are expected in the pending director's circular.
TransAlta wasted no time in responding to the recommendation. Steve Snyder, TransAlta's Chief Executive Officer, said "Canadian Hydro Developers' news release lists several factors, all of which are well known to the market and were considered by us in making our offer. We continue to believe that our offer provides Canadian Hydro Developers shareholders with significant, immediate and certain value for their shares."