Bloomberg News

Western Wind Says Algonquin Bid Undervalues Company by Half

October 12, 2011

(Updates with analyst’s comment in sixth paragraph.)

Oct. 12 (Bloomberg) -- Western Wind Energy Corp. Chief Executive Officer Jeffrey Ciachurski said a takeover bid from Algonquin Power and Utilities Corp. undervalues his Canadian producer of renewable energy by at least half.

Algonquin, the Oakville, Ontario-based utility operator, offered C$2.50 a share yesterday for Western Wind, based in Vancouver. Ciachurski said in an interview today that Western Wind should be valued at about twice that.

“The bid price is less than half of the valuation,” he said by telephone. “There’s no way we could rightfully endorse a C$2.50 bid.”

Western Wind is valued at C$364 million ($358 million), or more than C$5 a share, according to DAI Management Consultants Inc., Western Wind said in a statement in August. The stock closed at C$1.33 on Oct. 7, the last trading day before the offer became public yesterday. The shares had their biggest rally in more than a decade yesterday, surging 58 percent, and fell 1.9 percent to C$2.06 at 4:08 p.m. Toronto time.

Western Wind would be a better target for a U.S.-based acquirer because most of its projects are in the U.S. and renewable energy subsidies there would provide a benefit for the company, Ciachurski said.

Tax Credits

Those benefits, in the form of tax credits, add almost C$1.60 a share to Western Wind’s value for a buyer with at least $300 million in taxable U.S. income, said John McIlveen, an analyst at Jacob Securities Inc. in Toronto who has rated the stock “speculative buy” since March, 2010, when it was trading at C$1.53. Algonquin had C$108 million of U.S. revenue in 2010.

Combined with the value of Western Wind’s upcoming projects, the tax benefits mean the company may be valued at C$5 a share, McIlveen said. Buyers may include U.S. utilities and independent power operators, said McIlveen, whose C$2.35 price target includes only existing projects and those that are fully equity financed.

Algonquin submitted a “non-binding expression of interest to engage in discussions with Western Wind,” Kelly Castledine, a spokeswoman for the company, wrote in an e-mail today.

Algonquin spoke with some Western Wind shareholders and said it’s “confident” they would support the C$2.50 offer, Algonquin said in a statement yesterday.

Lawrence Casse, a spokesman for Western Wind, said the company is seeking advice from investment banks and hasn’t retained advisers yet.

Western Wind has two wind farms with a total capacity of 34.5 megawatts operating in California and a 10.5 megawatt wind and solar project in Arizona. It plans to bring its 120 megawatt Windstar wind farm online this year, also in California, and is developing a project in Puerto Rico.

--With assistance from Christopher Martin in New York. Editors: David Glovin, Alec McCabe

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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