Alinta Gets Management Buy-Out Offer

Australian gas and power utility Alinta said it had received a management buy-out approach from the group's chairman and top executives, sending its shares up over 12%.

Alinta, with a market capitalization of about A$5.5 billion (US$4.3 billion), said in a statement the proposal was based on a combination of cash and shares in a reshaped company, and was "designed to deliver a significant premium" to all shareholders.

Macquarie Bank was advising the buy-out group and was also considering participating in the proposal, it said.

The buy-out group included Chairman John Poynton, who had stood down from his position, Chief Executive Officer Bob Browning and three other executives.

Alinta said John Akehurst, former chief executive of Woodside Petroleum, would replace Poynton as chairman. "This is a huge conflict of interest because you have got the management team, driving the management buy-out," said an analyst who declined to be named.

"Anything they are proposing to do for a management buy-out, they could do it right now anyway. That is why this is a massive conflict of interest."

Alinta said the proposal would separate parts of the business, and analysts said it may result in Macquarie re-listing parts of the company's assets under a new vehicle.

Alinta in December cut its full-year profit estimate by as much as 11% due to lower dividends expected from a stake in the former Australian Gas Light.

Browning said then he could implement a further restructuring of the company in the first quarter of 2007, which could involve splitting the company into two, or offering two separate securities in one company.

The buyout proposal is the latest move in a welter of mergers and acquisitions in Australia, which hit a record US$171 billion in announced deals in 2006, according to Thomson Financial, aided by a surge in private equity takeovers.

Alinta, which bought infrastructure assets from the Australian Gas Light, now AGL Energy, in April, is pitching itself as a leader in consolidating power and gas transmission assets in Australia.

It competes against about ten other players, including Macquarie Bank and Babcock & Brown. Alinta is being advised on the deal by boutique adviser Carnegie Wylie & and JP Morgan.