Atlantic Power is abandoning an only-in-Canada corporate structure in a bid to build a larger shareholder following in the U.S. market.
The owner of 14 U.S. power plants, Atlantic Power is one of the U.S. companies that used the same template employed by Canadian income trusts to go public on the Toronto Stock Exchange back in 2004. The decision to go public in Canada reflected the premium domestic investors were willing to pay for companies that channelled cash to investors in a tax-efficient manner. It went public by selling what's known as income participating securities, or IPSs, and sold $320-million of units.
As a U.S. company, Atlantic Power will avoid the onerous tax regime that Canadian income trusts will encounter in 2011. However, its IPS structure is something of a corporate orphan, and is now seen as overly complex. So on Tuesday, the utility announced plans to convert to a traditional common share structure, and list on the New York Stock Exchange. As part of the conversion, Atlantic Power will pay $15-million (U.S.) to bring what's now an external management contract into the fold. The executives who stand to receive this payment for joining the company will be paid out over three years.
UBS Securities and BMO Nesbitt Burns advised on the planned metamorphosis, and BMO gave Atlantic Power's board a favourable fairness opinion on the conversion.
Atlantic Power's single largest unitholder, the Caisse de dépôt et placement du Québec, plans to vote its 19-per-cent stake in favour of conversion, as do officers and directors in the utility. The company has plants in nine U.S. states, and a California transmission grid. The utility said income-seeking domestic investors will sail through these changes, and RBC Dominion Securities analysts concurred with this view.
"The conversion will not impact the current $1.09 [Canadian] per unit distribution, as the company has sufficient operating losses to shield meaningful cash taxes for roughly five years," RBC Dominion Securities said in a report yesterday.
GUESSING GAME
The current boom in oil patch takeovers is easy to explain.
There are a number of junior and intermediate energy plays that promise to kick off strong cash flows, yet these companies are trading at relatively low valuations, by any historic measure. When senior energy companies see the opportunity to buy reserves on the cheap, you get acquisitions.
The fun comes in trying to guess who gets taken out next. On that front, investment dealer Peters & Co. took a look at valuations, and highlighted the most attractive targets.
In the wake of friendly bids for Breaker Energy and Highpine Oil & Gas - each of which is being bought by large trusts - Peters & Co. analysts screened domestic junior and intermediate companies on a number of criteria.
"NuVista Energy, Peyto Energy Trust, Twin Butte Energy and Yoho Resources stand out as being relatively inexpensive with their respective peer groups," Peters said in a report. Among junior oil and gas plays, Peters & Co. also singled out Ember Resources, Iteration Energy and Zargon Energy Trust.
At the other end, Crescent Point, NAL and PetroBakken emerged with the highest valuations, which makes these companies likely buyers in a consolidating sector.
GUNDY GETS NEW TOP BROKER
One of the country's largest retail brokerage networks is about to get a new leader, as Monique Gravel takes the reins from Tom Monahan at CIBC Wood Gundy.
CIBC announced yesterday that Mr. Monahan, a former stockbroker who has run a network of 1,400 financial advisers for years, is slated to become the CEO at CIBC Mellon on Nov. 2. Current CEO Tom MacMillan will become chairman of the custodial firm.
The new top broker at CIBC Wood Gundy has been with the firm since 1978.
One of Ms. Gravel's biggest challenges is building morale. In recent years, CIBC Wood Gundy has ranked near the bottom in surveys of stockbrokers conducted by magazine Investment Executive.
© The Globe and Mail
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