Why the Tilt Renewables (ASX:TLT) share price is soaring 15% today

The Tilt Renewables (ASX:TLT) share price is soaring today after the wind and solar infrastructure company received an acquisition proposal.

Mitchell Lawler

Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.

Published March 15, 2021 1:55 pm AEDT

The Tilt Renewables Ltd (ASX: TLT) share price is flying high today after the wind and solar farm owner and operator announced it's set to be sold off to two separate parties.

Wind of the potential acquisition hit the Australian Financial Review yesterday. The news stated that Tilt Renewables was in the late stages of discussions with Mercury NZ and QIC's renewable investment group, Powering Australian Renewables (PowAR).

flying asx share price represented by businessman flying through the air — Image source: Getty Images

Tilt Renewables board tells ASX they're all for it

In the announcement provided to the market, the Tilt board has recommended the proposed acquisition. This would entail Mercury NZ acquiring Tilt's New Zealand operations, while PowAR would acquire the company's Australian operations. The offer from the consortium is set at NZ$7.80 per share in cash to Tilt shareholders.

The proposal comes just over a month after the renewable infrastructure owner received an initial non-binding indicative proposal to acquire it in early February. At the time, Infratil Ltd (ASX: IFT), Tilt's largest shareholder, welcomed the proposal. Tilt went on to offer access to information to these companies to carry out due diligence.

Today's scheme has been fully endorsed by Infratil, as the company agrees to vote its entire 65.5% shareholding in favour of the acquisition.

Based on the current number of outstanding shares, the acquisition price of roughly $7.24 Australian dollars gives Tilt Renewables a market capitalisation of $2.73 billion. If all parties move forward with the deal it would mark the largest renewables deal ever in Australia and New Zealand.

What it means for other ASX listed parties

Today's news is certainly good for Infratil as well. The foreign investment company provided an update making its support for the acquisition known.

Furthermore, Infratil noted that the carrying value of its stake in Tilt was NZ$704.1 million at the end of September 2020. Hence, the sale price mentioned today represents over four times its book value.

AGL Energy Limited (ASX: AGL) also announced that it will be involved in the acquisition of Tilt due to its 20% interest in PowAR. As a result, AGL will contribute A$341 million towards funding PowAR's portion of the purchase.

The CEO of AGL, Mr Brett Redman. commented on the update:

The proposed acquisition by PowAR will provide more renewable energy options in AGL's generation portfolio, further supporting our orderly transition away from coal-fired power and responding to our customers' increasing appetite for cleaner energy

Tilting towards green

It's no secret there is a strong push for renewable energy across Australia and New Zealand. Last week's news of Victoria's Yallourn power station bringing forward its closure by four years is a sign of the times. As more legacy energy infrastructure assets falter, more renewables will be needed to meet the public's energy needs.

Today's news demonstrates how sought-after renewable infrastructure is becoming. As Tilt Renewables mentioned, the scheme represents a 40% per annum return to any shareholder who invested in the company upon its demerger in 2016. In the past year alone, Tilt shares have been a standout on the ASX, returning 156%.

At the time of writing, the Tilt Renewables share price is trading 15.36% higher at $7.06.

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