Australia AGL lodges counter-bid for Alinta

SYDNEY - Australia's largest energy retailer The Australian Gas Light Co. today launched a A$2.7 billion ($3.1 billion) counter-bid for smaller rival Alinta Ltd, rejecting Alinta's own takeover proposal tabled last month.

AGL, Australia's second-oldest company, said its offer was based on the same share-for-share ratio as Alinta's, but would place AGL's new chief executive Paul Anthony in charge of the combined company, offering ambitious Alinta chief Bob Browning control of an infrastructure company to be spun off later.

AGL said the acquisition would generate dividends at least as generous as those promised by Alinta, which had forecast a 14.5 per cent uplift on AGL's current payout by 2007, if its audacious bid for a rival three times its size succeeded.

Western Australian utility Alinta acquired 19.9 per cent of AGL in February and proposed an A$8.9 billion all-share takeover, based on an identical idea to combine its pipeline and generation portfolio with AGL's before splitting the company into separate energy and infrastructure businesses.

AGL's offer retains that plan, which frees each unit to play to their differing strengths, and has accordingly withdrawn its own plan to split without Alinta, and cancelled a shareholder meeting arranged to approve it later this month.

AGL will offer 0.564 shares for each Alinta share, mirroring Alinta's own offer of 1.773 shares for AGL.

The stake in AGL cost Alinta more than A$1.7 billion, all of its available capital, but analysts believe Alinta could reject AGL's bid and resolutely hold its non-controlling stake as AGL's dividend payments offset the heavy finance costs its loans incur.

Alinta had identified A$100 million in annual synergies from combining the companies, drawn from lower head office and financing costs, better asset management and tax-efficient depreciation. AGL has not commented on synergies.

The combined group would supply 38 per cent of Australia's energy customers in a market forecast to grow nearly 40 per cent by 2020. It would add AGL's 3 million customers in Australia's east to Alinta's 500,000 in the west and combine portfolios of highly-regulated power generation and distribution assets.

Alinta has grown quickly under Browning's five-year tenure, snapping up assets and tripling its share price, as well as spinning off a separate infrastructure arm, Alinta Infrastructure Holdings in a A$700 million deal in 2005.

The local competition regulator has suggested a merger would not pose insurmountable problems given the different geographical areas in which the companies operate, citing only minority stakes in some eastern Australian gas pipelines as areas for concern.

- REUTERS