EDPR minority shareholders continue to resist EDP's tender offer
14 JUL 2017
[The fifth paragraph has been changed to reflect that EDP has until five calendar days before end of offer period to increase its offer price.]
Energias de Portugal's [ELI:EDP] bid for EDP Renovaveis [ELI:EDPR] continues to see resistance from shareholders who plan to reject the proposed offer, said two minority shareholders.
“The deal doesn’t sit well with us, (based on the) value of company,” said Murray Rosenblith of New Alternatives Fund, which does not plan to accept the offer as it stands. “We’d prefer to keep EDPR as we’ve held it for a while.”
EDP might do one or even two incremental increases in its proposed offer to appease shareholders, the fund manager said, adding that “for us, it’s not just about price, it’s about circumstances.” New Alternatives owns around 1.5m shares, or 0.17% of EDPR.
In March, 77% shareholder Energias de Portugal announced plans to make a EUR 6.80-a-share offer on the stake it does not own, valuing the company’s total equity at EUR 4.36bn. Shareholders expressed concern that the proposed offer’s 8.45% premium on the previous day’s closing price was inadequate on the deal’s announcement call. The offer period began 6 July and ends 3 August.
“The deal doesn’t sit well with us, (based on the) value of company,” said Murray Rosenblith of New Alternatives Fund, which does not plan to accept the offer as it stands. “We’d prefer to keep EDPR as we’ve held it for a while.”
EDP might do one or even two incremental increases in its proposed offer to appease shareholders, the fund manager said, adding that “for us, it’s not just about price, it’s about circumstances.” New Alternatives owns around 1.5m shares, or 0.17% of EDPR.
In March, 77% shareholder Energias de Portugal announced plans to make a EUR 6.80-a-share offer on the stake it does not own, valuing the company’s total equity at EUR 4.36bn. Shareholders expressed concern that the proposed offer’s 8.45% premium on the previous day’s closing price was inadequate on the deal’s announcement call. The offer period began 6 July and ends 3 August.
Another Lisbon-based minority shareholder told this news service that it also was not going to tender into the offer, and added that other Portuguese minorities are in the same position. The shareholder said that EDP has until five calendar days before end of offer period to increase its offer price, which is mentioned in the CMVM code.
The shareholder noted that EDP added a sort of “Plan B” in the prospectus last week in a clear sign that EDP saw that a lot of minorities were not going to sell. On 5 July, EDP released a prospectus stating that it could pursue a merger to acquire EDPR depending on the results of the takeover offer. Shareholders might only approve a merger proposal if it is on more attractive terms than the current, the shareholder said, speculating that EDP could offer a better premium in the share swap.
A source on the bidder side noted that EDP has given all the possible options to shareholders and that they are going to have to carefully evaluate what is better for them. The source added that the merger proposal would be subject to an evaluation made by an independent auditor and that the current offer price would be a reference point.
Though the merger option was added to the prospectus, the cash offer is friendlier, said the source, who noted that similar deals in the sector, for example those by Iberdrola [BME:IBE] and EDF [EPA:EDF], did not offer full cash.
The shareholder noted that EDP added a sort of “Plan B” in the prospectus last week in a clear sign that EDP saw that a lot of minorities were not going to sell. On 5 July, EDP released a prospectus stating that it could pursue a merger to acquire EDPR depending on the results of the takeover offer. Shareholders might only approve a merger proposal if it is on more attractive terms than the current, the shareholder said, speculating that EDP could offer a better premium in the share swap.
A source on the bidder side noted that EDP has given all the possible options to shareholders and that they are going to have to carefully evaluate what is better for them. The source added that the merger proposal would be subject to an evaluation made by an independent auditor and that the current offer price would be a reference point.
Though the merger option was added to the prospectus, the cash offer is friendlier, said the source, who noted that similar deals in the sector, for example those by Iberdrola [BME:IBE] and EDF [EPA:EDF], did not offer full cash.
In fact, EDF offered minority shareholders in EDF Energies Nouvelles EUR 40 a share in cash in 2011, representing a 9.2% premium on the share price a day before the announcement. Target shareholders could also elect to receive an equity alternative at a 11.2% discount to EDF Energies Nouvelle’s previous trading day close price, but shareholders were given the choice of either offer without limit.
Spain's Iberdrola bought back its Iberdrola Renovables unit in 2011, after a 2007 IPO. That offer was for a mixed equity and cash consideration, including a EUR 1.20 special dividend, though the deal was valued at a 0.33% discount on the renewables group share price a day before the deal was announced.
CEO Antonio Mexia of EDP has already said it is not raising the offer price, the source concluded.
However, a lawyer not involved in the situation said it would be difficult for EDP to achieve a squeeze-out.
According to CMVM rules, EDP needs to secure more than 90% of EDPR's voting rights and 90% of the shares subject to the offer for a squeeze-out. This "90 plus 90" rule needs to change as it is very hard to achieve, the lawyer said.
EDPR’s largest minority shareholder MFS, with a 3.1% stake, would not comment beyond its letter issued in April.
The bid was initially expected to be registered in mid-May, though cross-border administration caused it only to be registered last week, as reported. EPDR, the target, is a Spanish legal entity, though it is listed in Lisbon. After discussions between stock market regulators in Spain and Portugal, it was decided that Portuguese rules would be followed.
EDPR and EDP did not reply to requests for comment.
Spain's Iberdrola bought back its Iberdrola Renovables unit in 2011, after a 2007 IPO. That offer was for a mixed equity and cash consideration, including a EUR 1.20 special dividend, though the deal was valued at a 0.33% discount on the renewables group share price a day before the deal was announced.
CEO Antonio Mexia of EDP has already said it is not raising the offer price, the source concluded.
However, a lawyer not involved in the situation said it would be difficult for EDP to achieve a squeeze-out.
According to CMVM rules, EDP needs to secure more than 90% of EDPR's voting rights and 90% of the shares subject to the offer for a squeeze-out. This "90 plus 90" rule needs to change as it is very hard to achieve, the lawyer said.
EDPR’s largest minority shareholder MFS, with a 3.1% stake, would not comment beyond its letter issued in April.
The bid was initially expected to be registered in mid-May, though cross-border administration caused it only to be registered last week, as reported. EPDR, the target, is a Spanish legal entity, though it is listed in Lisbon. After discussions between stock market regulators in Spain and Portugal, it was decided that Portuguese rules would be followed.
EDPR and EDP did not reply to requests for comment.