Proposed takeover of US renewable giant Pattern Energy should be rejected – investor

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Image credit: Pattern Energy

Backers of US renewable player Pattern Energy should turn down its proposed US$6.1 billion acquisition by a Canadian pension plan, one of Pattern’s shareholders has said.

Water Island Capital – an entity controlling 4-plus million shares of Pattern – released on Tuesday an open letter urging fellow shareholders to reject the takeover bid by CPPIB, a Toronto-based pension giant Water Island believes is “undervaluing” Pattern.

As Water Island itself acknowledged, the CPPIB-Pattern merger agreement revealed last November is likely to remain in place even if other backers follow its advice, and cast their votes against it at a special meeting of Pattern shareholders slated for 10 March.

In Water Island's view, however, a rejection would send a message to CPPIB that the takeover price it proposed last November for Pattern – US$26.75 per share – is too low, and must be revised in light of the “surge” seen with green energy stocks in the intervening months.

The upwards shift in the valuation of renewable firms has been “seismic” in the past few months, Water Island claimed. Should it remain as it stands, CPPIB’s “undervaluing” offer price would allow the pension fund to “reap a windfall” from the gap created as green energy stocks rallied.

The merger plans of Pattern’s CA$409.5bn new owner

Whether other Pattern shareholders will heed Water Island’s calls at the 10 March meeting remains to be seen. At around 7 to 9 million shares each, the top three backers of the Nasdaq-listed renewable firm are Vanguard Group, pension plan PSP Investments and BlackRock.

The prospect of a new owner finds Pattern having crossed the 4.4GW mark for its portfolio of wind and solar. Founded in 2009 and publicly traded since 2013, the firm is headquartered in San Francisco and owns 28 green energy plants in the US, Canada and Japan.

Pattern’s latest available results – its Q3 2019 update, released last November – shows the group sold 5,965,313MWh of renewable electricity throughout the first nine months of 2019. The firm claims to be eyeing a 10GW green energy pipeline, with right of first offer on a 612MW batch.

CPPIB – which administers around CA$409.5 billion (US$309 billion) on behalf of some 20 million Canadians – plans to merge Pattern Energy with its privately-held sister company, wind and solar developer Pattern Development (Pattern Energy Group Holdings 2 LP) post-takeover.

Three months before it settled for CPPIB as its prospective new owner, Pattern acknowledged being courted by various suitors. At the time, the firm’s shares rose by 8% following reports on Bloomberg of takeover interest by Brookfield Asset Management, which is also Toronto-based.

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