OPTrust joins consortium bidding for Australia's Zenith Energy

PEP's secure assets fund – which targets companies in areas such as energy, logistics, telecom and healthcare that generate annuity income with the potential for private equity-style operational improvements – offered to buy Zenith in early March. The company's board agreed to a scheme of arrangement at a price of A$1.01 per share, a 45.3% premium to the March 6 closing price.

However, OPTrust entered the fray in April, building up a 17.61% position in Zenith within the space of three weeks. PEP then requested permission from the Zenith board to pass due diligence information to OPTrust with a view to including it in the consortium, according to a filing. The GP warned that the scheme might be difficult to implement if OPTrust voted against it.

The only change in the revised scheme of arrangement is the addition of OPTrust. Peter Torre, chairman of the independent board committee established to consider the offer, said in a statement that the scheme is "even more compelling for shareholders to benefit from the greater certainty of cash for their shares, given the backdrop of current market volatility."

As of mid-afternoon trading on June 2, Zenith's stock was trading at A$0.98, up 0.5% for the day. It jumped from A$0.96 to A$1.00 on June 1, in response to the revised offer, before closing at A$0.98.

Zenith specializes in cost-effective power generation systems for installation in remote, off-grid areas of Australia and Southeast Asia. Fuel sources include diesel, gas, solar, and hydro technologies, with some projects being hybrids. Contact options include a build-own-operate model whereby Zenith takes full responsibility for an operation, and a manage-operate-maintain model, whereby clients maintain ownership. 

Income is generated primarily from sales of electricity and contracts for engineering, procurement and construction work. Revenue improved 7% during the 2019 financial year to about A$55 million, with the company citing strong growth in build-own-operate contracting. Profit declined 31% to A$5.8 million, which was attributed in part to increases in project-related depreciation charges and finance costs.

OPTrust had C$27.1 billion ($19.4 billion) in total assets at the end of 2019, with a 12.9% allocation to private equity. The private markets program – which covers several asset classes – started in 2005 but already accounts for nearly 30% of the portfolio. OPTrust established a Sydney office in 2012 and has a team of five covering private equity and infrastructure. There is a 50-50 split between fund and direct investments, with the latter highly concentrated on deals in Australia.

There is a preference for long-dated investments – perhaps longer than most GPs would like – at the nexus of private equity and infrastructure. The portfolio includes SkyBus, which operates airport shuttle and public bus services, and Judo Bank, a lender to small and medium-sized enterprises (SMEs).

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• Topics
• Australasia
• Buyouts
• Infrastructure
• Industrials
• Australia
• Pacific Equity Partners
• OPTrust
• energy