Australian infrastructure firm SP Ausnet plans to raise about A$3 billion in an institutional share placement to help fund its purchase of A$8.32 billion (US$7.7 billion) of assets from energy firm Alinta.
The acquisition, expected to be funded 36 percent by equity and 64 percent by debt, will transform SP Ausnet into Australia's biggest energy transmission company.
SP Ausnet, majority owned by state utility Singapore Power, said on Friday it planned to issue new securities at A$1.20 each, and no lower than A$1.10.
The group also said it had debt financing commitments in place for a A$2.5 billion syndicated facility, and a 12-month A$3.7 billion bridging facility.
"Strategically, in the long term, it is a good deal for the company and, therefore, for its investors. The management has also found a way of structuring the deal which would satisfy shareholders," said Peter Russell, utilities analyst at Intersuisse Ltd in Melbourne.
Shares in SP Ausnet, which have fallen about 7 percent so far this year. The company is valued at around A$2.6 billion.
Under the Alinta deal, announced in September, SP Ausnet will get gas and electricity distribution networks in New South Wales and Victoria, and two natural gas pipelines and an energy asset management unit in eastern Australia.
Alinta was acquired and carved up by a consortium of investment firm Babcock and Brown and Singapore Power in August.
SP Ausnet said the acquisition would boost its distributions and cash flow growth from 2009 thanks to lower capital intensive assets and long-term growth potential.
Distribution per security in 2009 would be about 2.5 percent higher at 12.14 cents a share, the company said.
Earnings before interest, tax, depreciation and amortization (EBITDA) were estimated to be A$1.27 billion in 2009 -- about 90 percent higher than forecast EBITDA under the existing SP Ausnet.
The acquisition will also increase SP Ausnet's sales volumes through gas transmission pipelines, demand for the provision of infrastructure services as well as increased revenue diversification, SP Ausnet said.
"This acquisition will give us a transformational growth opportunity which will see us expanding out of Victoria to the rest of the country," SP Ausnet Managing Director Nino Ficca told an analyst briefing.
Chief Financial Officer Geoff Nicholson said the company's overall capital structure would remain conservative after the transaction, leaving room for SP Ausnet to pursue other growth opportunities.
Rating agency Standard & Poor's said it would lower SP Ausnet's rating to A- from A after the acquisition.
"Although the group's business diversity will improve ... increased gearing levels and exposure to non-regulated businesses will result in overall deterioration of SP Ausnet's credit quality," S&P's credit analyst Parvathy Iyer said.
Nicholson said SP Ausnet's overall gearing would increase to 61 percent from 58 percent following the transaction.
Morgan Stanley, UBS and Goldman Sachs JBWere are underwriting the institutional component of the raising. Security holders will vote on the acquisition on Dec. 11.