Backlash possible as investors protest Alinta sale

Alinta can expect a substantial protest vote from small shareholders when they meet in August to approve the proposed Babcock & Brown Ltd-Singapore Power takeover.

Alinta chairman John Akehurst was challenged by shareholders at the company's annual general meeting who expressed concern about the proposed sale of the business.

Shareholders spontaneously applauded when Mr Akehurst was told that many investors did not want to sell.

Investors at the meeting also expressed their concern that a foreign company, Singapore Power, was acquiring many of the assets.

Mr Akehurst told the meeting that Alinta shareholder base was split roughly 50-50 between small shareholders and institutions.

Alinta's future will be decided at a shareholders' meeting in August, when a majority of shareholders and at least 75 per cent of the votes cast must be in favour of the Babcock proposal for it to proceed.

After the meeting, Mr Akehurst said that the board was duty bound to recommend the bid which offered the best value to shareholders, irrespective of other considerations.

When asked about former chairman and MBO-player John Poynton, Mr Akehurst said that there was not any bad blood between them and they still work closely together on boards like the University of WA business school.

In the meeting, before questions came from the floor, Mr Akehurst provided a detailed defence of the company's recent sale process, which resulted in the board supporting a proposed sale of the business to investment bank Babcock & Brown Ltd.

Babcock & Brown global head of infrastructure Peter Hofbauer also addressed the meeting to explain the merits of his company's proposal.

Babcock and Macquarie Bank have been scrapping for control of Alinta since the start of the year, when it emerged that former chairman John Poynton, former managing director Bob Browning and three other executives were considering a management buyout.

The MBO group was initially planning to work with Macquarie, which had been Alinta's main corporate adviser over the past few years.

The close relationship appears to have been ruined, with Alinta's board releasing a scathing assessment of Macquarie's initial proposal.

That followed the board's decision, in late March, to recommend a proposal put forward by Babcock and Singapore Power that valued Alinta at $15.00 per share.

The board said this was markedly superior to an internal restructuring it had been evaluating "in terms of overall value, certainty and timing".

Macquarie countered early this month with a new proposal, which valued Alinta at $15.95 per share.

That forced Babcock to improve its offer to $16.06 per share.

The Alinta board scrutinised both proposals before concluding that Babcock's revised $7.9 billion offer was superior.

"It was a unanimous decision by the directors and was in line with a recommendation of our financial advisers," Mr Akehurst told the AGM.

He said the Babcock proposed delivered "excellent shareholder value and a high degree of completion certainty".

One of the challenges facing the board and its advisers, Carnegie Wylie, JPMorgan and Blake Dawson Waldron, was that a simple like-for-like comparison of the competing proposals was not possible.

The Babcock proposal comprises $8.925 in cash plus units in four listed entities, including Babcock & Brown Infrastructure exchangeable preference shares that offer capital gains tax rollover relief.

Alinta shareholders with less than 1,000 shares will be able to accept all cash, to avoid holding small unmarketable parcels in the Babcock entities.

Mr Akehurst will be writing to shareholders this week confirming that the board favours the Babcock proposal over Macquarie.

"While both offers delivered similar headline financial outcomes, the B&B/SP proposal was favoured as it offers greater completion certainty and higher confidence in the value of the scrip component of the consideration," the letter to shareholders states.