Deal focus: TPG makes surprise trade sale

Multi-billion-dollar deals in Australia tend to attract media coverage well before negotiations conclude. But with the more than A$4 billion ($3.1 billion) sale of domestic power utility Alinta Energy, TPG Capital needed to plug any potential leaks. Despite the politics inherent in offshoring a major infrastructure service, the deal remained under the radar until contracts were signed.

Stealth was important because any publicity around a fizzled trade sale could have been damaging to the Alinta brand, especially in light of the gas company’s awkwardly protracted IPO process. The business had been on the market for more than a year and postponed a float on two occasions.

The most recent delay was decided late last year based on concerns about local IPO fatigue and market noise related to the US elections. Around this time, Joel Thickins joined the firm as head of Australia and a clandestine dual-track sale process was initiated. A number of potential trade players were identified but talks with the eventual buyer had not yet begun.

Chow Tai Fook Enterprises (CTFE), a family office-style investor best known as Hong Kong’s largest jeweler, eventually came to the fore on the back of historical relations between its top leadership and TPG’s managing partner in Asia, Tim Dattels. The company had no experience in energy, having previously focused on real estate and tourism investments alongside its jewelry empire. Nevertheless, an agreement was reached in about 10 weeks.

“They were extremely professional and well managed throughout. Their team was world class,” says one person familiar with the transaction. “The IPO really forced them to get across issues and come to terms quickly.”

The sale requires approval from Australia’s Foreign Investment Review Board, and hopes for a positive outcome are supported in part on CTFE’s ability to fund Alinta’s growing renewable energy ambitions. The Australian government has experienced some diffiulty in balancing environmental concerns with rising electricity needs.

The environmental angle was always a part of the TPG value-add scheme. After making a A$2.1 billion investment in the company as part of a consortium in 2011, the GP worked on improving customer relationships and cleaning up contracts with key counterparties. But as Alinta expanded from its core market in Western Australia to the more lucrative eastern states, a cleaner vision for the company’s profile began to become a priority. 

This growth coincided with the shut-down of the company’s Flinders coal-fired power plant in South Australia and the outline of a more diversified energy production portfolio.

“Even with ongoing global market volatilities and uncertainty, we see promising opportunities for growth and development in the region,” says Thickins. “We will continue to identify ways to selectively deploy capital as we build upon TPG’s presence in the market.”

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• Topics
• Australasia
• Trade sale
• Infrastructure
• Infrastructure
• TPG Capital
• Australia
• Exit
• energy