A “very clean” bid was the distinguishing feature of AGL’s $1.43 billion acquisition of Southern Hydro, according to Gilbert + Tobin partners Gary Lawler and Rachel Launders. Allens Arthur Robinson acted for Meridian.
The acquisition was conducted via a standard competitive process, but the structure towards the end was more unusual because the buyer and vendor had already signed a Share Sale Agreement.
Launders said the company had wanted to submit a bid “that was as clean as possible”, and a lot of work was done in advance to ensure that that happened. “AGL had to make sure they wouldn’t have any conditions, like ACCC approval, as part of the bid,” she said.
The ACCC and the Essential Services Commission both gave their tick of approval before the bid. “I think all of that helped Meridian to decide to let us in to the final stage,” Launders said.
Launders described the pre-negotiation of the Share Sale Agreement as a “sensible but commercial approach”. “AGL ended up with quite a good document that gave it a lot of protection without them having to spend months negotiating every point.”
Lawler said this process was assisted by the fact that both the vendors and buyers were reasonable in their requirements. There was room for negotiations to continue before sign off, but having the Share Sale Agreement “fully drafted and agreed” when the bid was put in “made completing the transaction relatively easy,’ he said.
“We were thinking there might be some reopening on some small issues between when we were told we were the preferred bidder and when we signed, but that didn’t happen at all,” Launders added.
AGL outbid Babcock & Brown and Origin Energy in order to add Southern Hydro’s assets — 11 hydro power stations in NSW and Victoria and Australia’s largest wind farm, in South Australia — to its portfolio. Some analysts have said the price tag was too high for the company, but the purchase is a strategic fit with AGL’s plans to separate its retail and infrastructure businesses to form two separate listed companies.
Lawler said it should be apparent that Southern Hydro’s assets were a very strategic acquisition and were “not assets which can be duplicated”. Gilbert+Tobin will also work on AGL’s demerger, which is expected to be completed in April next year.