AGL Energy Eyes Deal with Macquarie for AlintaAGL

AGL Energy, Australia's largest energy retailer, said on Friday it would team up with Macquarie Bank to acquire the 67% of the AlintaAGL retail business it does not own, if Macquarie makes a revised bid for Alinta.

Macquarie's first offer for energy infrastructure group Alinta was trumped in March by investment firm Babcock & Brown's A$7.4 billion (US$6.1 billion) cash and stock proposal, which was recommended by Alinta's board.

AGL said in a statement that it was also negotiating with Babcock & Brown to acquire the retail business, but stated that it has not entered an agreement with either party.

AlintaAGL, spun off in an asset swap deal between AGL and Alinta last year, is a joint venture company that holds Alinta's Western Australia retail and generation businesses.

Macquarie Bank said in a separate statement that it was still considering acquiring Alinta, which had put itself up for sale after receiving a management buyout proposal in January.

Local media reported on Friday that Macquarie was close to submitting a revised A$15.45 a share, all-cash offer for Alinta.

Macquarie's first offer in March was a A$15.45 per share cash and scrip bid. Alinta's board had rejected the proposal, saying the deal included shares in an untested new vehicle.

Under the agreement with AGL, Macquarie would sell to AGL the AlintaAGL power retailing business AGL does not already own in exchange for AGL agreeing to sell to Macquarie its interests in several Alinta generators, according to newspaper reports.

Macquarie may be planning to use the proceeds of any AGL deal, which could be about A$400 million, to fund a cash return to Alinta shareholders as part of a sweetened offer.

A source familiar with the situation said there was a Friday deadline for Macquarie to return information it had access to on Alinta, but that did not mean it had to submit an offer by Friday.

Another source said Macquarie was still working on finalizing an underwriting package for a bid.

Babcock offered Alinta shareholders A$8.50 in cash per share as well as 7.83 shares of Babcock & Brown Infrastructure, 1.30 shares of Babcock & Brown Wind, 3.31 shares of Babcock & Brown Power and 1.51 Australia Pipeline Trust units for every five Alinta shares.

In a bid to sweeten the deal, Babcock, which has teamed up with state-owned utility Singapore Power, said on April 16 it would offer shareholders with 1,000 Alinta shares or less the opportunity to receive all cash.