Infratil's investments include stakes in Trustpower, Vodafone New Zealand and Wellington Airport. Photo / Mark Mitchell.
Infratil's investments include stakes in Trustpower, Vodafone New Zealand and Wellington Airport. Photo / Mark Mitchell.
The sale of its Australasian renewables business means Infratil is unlikely to see another bid from AustralianSuper, analysts at Forsyth Barr predict, speculating the mega payday could mean additional returns to shareholders.
On Monday, Tilt Renewables announced it had entered into an agreement, which would see it sold to anAustralian consortium for $7.80 a share, valuing the company at close to $2.96 billion.
While the offer is subject to an independent review and regulatory approval, analysts seem to see little risk to the deal being blocked, with the sale price likely to meet or exceed valuation, and the structure of the offer meaning assets in New Zealand and Australia will be owned separately and both under local ownership.
For Infratil, the Wellington investment fund, the sale of its nearly two-thirds stake in Tilt is valued at $1.9b, or $1.7b after a roughly $200 million incentive fee is paid to the fund's manager, HRL Morrison & Co.
Infratil announced it was undertaking a review of Tilt in early December, just days before AustralianSuper confirmed it had tabled a non-binding offer for the company and was seeking talks, valuing it at $5.4b.
After Infratil dismissed the bid, AustralianSuper, the superannuation giant, has said nothing publicly about its plans since.
Forsyth Barr analysts Aaron Ibbotson and Matt Montgomerie said the sale of Tilt was likely to mean no more bid.
"The Australian Super Fund has gone quiet since its rejected bid of IFT three months ago. We believe that [Tilt] and Canberra Data Centres (CDC) were the two main assets of interest to Australian Super, with one of them now likely gone we believe a new bid is off the table."
However, the analysts raised their target price on Infratil by 4.5 per cent to $8.20 (and which is now more than 30 per cent above the Forsyth Barr target price prior to the AustralianSuper approach became public), saying the "conglomerate discount" previously applied to Infratil was now likely permanently removed.
Infratil is an investment fund managed by Wellington investment bank Morrison & Co. The sale of Tilt could see the bank earn around $200m in incentive fees. Photo / Hamish Rutherford
"We do believe that the bid has contributed to a 'permanent' removal of Infratil's historic double discount," Ibbotson and Montgomerie wrote.
"The disciplined [Tilt] exit solidifies our view that the market is unlikely to return to applying a conglomerate discount for the foreseeable future."
According to the analysis, Infratil's gearing ratio will drop to 1 per cent when the sale is completed, compared to 41 per cent in March 2020.
"We would expect the lion's share of the net [$1.9b] proceeds to be re-deployed into new assets. However, we would not rule out some form of capital distribution."
Tilt Renewables was demerged from TrustPower in 2016. A cornerstone investment in TrustPower was Infratil's original investment and the company retains a majority stake now.
It also owns a majority stake in Wellington Airport and a half share in Vodafone New Zealand.
Elsewhere, Forsyth Barr's energy analysts Andrew Harvey-Green and Scott Anderson described the price being offered for Tilt as "eye-watering".
"The price is even more impressive in light of recent interest rate increases and ongoing softness in Australian wholesale electricity prices."
The sale price was driven by the Australian business, with the $770m being paid for the New Zealand business by Mercury implying an enterprise value of 15.4 times EBITDAF, compared to 37.4 times for the Australian business.
Mercury meanwhile had been transformed into one of New Zealand's largest wind-farm operators, Harvey-Green and Anderson wrote, prompting Forsyth Barr to raise its target price on the company by 6 per cent to $6.10 a share, with dividends likely to rise around 3c a share.
"We are positive on the deal as the price paid is reasonable (aided by the price it is receiving for its share of [Tilt's] Australian assets) and the strategic benefits are significant."
