North Yorkshire-based power company Drax Group said on Monday it agreed to buy Canada-based Pinnacle Renewable Energy Inc — a producer of sustainable biomass — in a deal with an implied enterprise value of C$741 million ($580.58 million) including debt.
Drax said the C$11.30 per share offer represented a 13% premium to Pinnacle’s February 5 closing price, adding that the acquisition — funded “from cash and existing agreements” — has been approved by the board of the Canadian company.
Pinnacle Renewable Energy produces sustainable fuel for renewable electricity generation.
Drax said: “The board believes that the acquisition advances Drax’s biomass strategy by more than doubling its biomass production capacity, significantly reducing its cost of biomass production and adding a major biomass supply business underpinned by long-term contracts with high-quality Asian and European counter parties.
“The acquisition positions Drax as the world’s leading sustainable biomass generation and supply business alongside the continued development of Drax’s ambition to be a carbon negative company by 2030, using Bioenergy Carbon Capture and Storage (BECCS).”
Drax added: “The acquisition will be implemented by way of a statutory plan of arrangement in accordance with the laws of the Province of British Columbia, Canada, at a price of C$11.30 per share (representing a premium of 13% based on the closing market price as at 5 February 2021 of C$10.04 per share and valuing the fully diluted equity of Pinnacle at C$385 million (£226 million), with an implied enterprise value of C$741 million, including C$356 million of net debt).
“The acquisition, which remains subject to Drax and Pinnacle shareholder approval, court approval, regulatory approvals and the satisfaction of certain other customary conditions, has been unanimously recommended by the board of Pinnacle and has the full support of Pinnacle’s major shareholder, affiliates of ONCAP (which, together hold shares representing approximately 31% of Pinnacle’s shares as at 5 February 2021).
“Completion is expected to occur in the second or third quarter of 2021.”
Drax CEO Will Gardiner said: “I am excited about this deal which positions Drax as the world’s leading sustainable biomass generation and supply business, progressing our strategy to increase self-supply, reduce our biomass production cost and create a long-term future for sustainable biomass.”
“We expect to benefit greatly from Pinnacle’s operational and commercial expertise, and I am looking forward to what we can achieve together.”
Pinnacle CEO Duncan Davies said: “Pinnacle’s board of directors has unanimously determined that the transaction represents the best course of action for the company and its shareholders.
“On closing, the transaction will deliver immediate, significant and certain cash value to our shareholders.
“At the same time, the combination of Pinnacle and Drax will create a global leader in sustainable biomass with the vision, technical expertise and financial strength to help meet the growing demand for renewable energy products, which is exciting for our employees, customers and others around the world.”