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Shell Energy Australia proposes acquisition of ERM Power
Posted on Thursday, 22 August 2019 11:21
Shell Energy Australia, a subsidiary of Royal Dutch Shell (Shell), has entered into a scheme implementation agreement to acquire ERM Power for about AUD 617.00 million (USD 418.64 million).
The buyer has tabled an offer of AUD 2.47 per share in cash, representing a premium of 43.6 per cent to the target’s close of AUD 1.72 prior to the announcement yesterday.
Directors of ERM Power has recommended that stockholders vote in favour of the deal.
Shell is looking to become the world’s top power producer by 2030 and is hoping buying Australia’s second-largest electricity retailer to commercial and industrial customers will be a significant foot in this direction.
Zoe Yujnovich, chairman of the buyer’s operations in the country, said: “This acquisition aligns with Shell’s global ambition to expand our integrated power business and builds on Shell Energy Australia’s existing gas marketing and trading capability.
“ERM will become our core power and energy solutions platform and this acquisition is a significant step forward in growing Shell’s integrated power business in Australia.”
Information on the offer is expected to be sent to shareholders of the target in early October 2019, with the investors meeting in November to vote on the proposal.
ERM Power generated underlying earnings before interest, taxes, depreciation and amortisation and foreign of AUD 90.50 million in the year ended 30th June 2019, down 7.0 per cent from AUD 97.50 million in the previous 12 months.
Shell is already one of the largest gas producers in Australia and is hoping to use its large presence globally to launch a leading power business as the world continues to shift towards cleaner energy.
The group plans to increase annual spending on this strategy to between USD 2.00 billion and USD 3.00 billion by 2025.
In 2019 to date, there have been 25 deals targeting the Australian electric power generation, transmission and distribution sector, according to Zephyr, the M&A database published by Bureau van Dijk.
The largest of these so far involves QIC Private Capital, via QGIF Swan Bidco, agreeing to acquire Pacific Energy for AUD 487.00 million.
© Zephus Ltd