Contact Energy and Manawa Energy Announce $2.3-billion Merger Proposal
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- Contact Energy proposes a $2.3-billion merger, acquiring electricity generator Manawa Energy.
- Manawa shareholders would own approximately 18.5 percent of Contact shares post-merger completion.
- The deal is subject to Commerce Commission, High Court, and shareholder approvals.
Contact Energy has announced plans to acquire fellow power company Manawa Energy in a deal valued at approximately $2.3 billion. The proposal would see Contact pay a combination of cash and its own shares, totalling $5.95 for each Manawa share. Manawa's shares were last trading just above $4.00, meaning the offer represents a significant premium. The total value of the deal is estimated at just under $1.9 billion, with Contact also set to take on Manawa's $400 million debt.
Contact Energy's CEO, Mike Fuge, emphasised the advantages of the merger, particularly in terms of improving resilience and diversifying Contact's power generation capabilities. “Our hydro assets are complementary, with different seasonal generation profiles, which will help Contact to better manage dry year risk and to sell larger volumes of fixed price electricity into the market than we could independently," Fuge stated.
Manawa Energy, a renewable power generator formed after the split of Trustpower’s retail business, sees the merger as an attractive opportunity. Its chair, Deion Campbell, noted that the combination of Manawa’s hydro schemes with Contact’s geothermal assets would result in a diverse and robust generation portfolio. “The combination of our hydro schemes with Contact's generation assets, including its base load geothermal fleet, creates a unique generation portfolio, with significant diversification benefits,” Campbell commented.
Once the merger is completed, Manawa shareholders will hold approximately 18.5 percent of Contact’s shares. As part of the deal, Campbell is expected to join the Contact board.
Manawa’s majority shareholder, Infratil, which owns 51 percent of the company, is in favour of the deal. Infratil CEO, Jason Boyes, highlighted the premium offered, noting it was 48 percent higher than Manawa’s share price before the announcement. Boyes estimated that Infratil’s gross cash proceeds would be around $186 million, with the company retaining a 9.5 percent stake in Contact after the transaction.
The merger is subject to various approvals, including from the Commerce Commission, the High Court, and shareholders.