DUET Group (ASX: DUE) is set to acquire ASX-listed Energy Developments Limited (ASX: ENE) for a grand sum of $1.9 billion.
In an announcement to the market yesterday, Duet, which is an Australian energy infrastructure group, said that it has entered into a scheme implementation deed with Energy Developments.
In what Duet describes as being a "strong strategic fit" with its business, Energy Developments is a company that supplies natural gas which it extracts from mine sites and garbage dumps. It also owns and operates a portfolio of power generation facilities across various projects in Australia, the United States and in Europe.
Duet will pay $8.00 per share for the business, which represents a 3.6% premium to Energy Development's closing price on Friday and a 17% premium to the stock's six-month volume weighted average price. It also represents a multiple of 8.8x the unaudited 2015 financial year earnings before interest, tax, depreciation and amortisation (EBITDA) of $218 million.
Energy Developments' board has unanimously recommended that shareholders vote in favour of the scheme which Duet will fund by a $1.67 billion capital raising.
A total of $550 million will be raised via an institutional placement while a 1-for-2.69 entitlement offer will aim to raise $1.12 billion at $2.02 cents per share. That means that for every 2.69 Duet shares you own, you will be entitled to acquire one more at a price of $2.02.
While a $1.67 billion capital raising is a big ask considering Duet has a market capitalisation of just over $3.5 billion, the offer should prove somewhat attractive to many investors. Aside from the fact that the offer price represents a 15.1% discount to yesterday's closing price, the stock will also yield nearly 8.7%, albeit unfranked. In this low interest rate environment, that is a very compelling yield.
