TransAlta investor challenges Brookfield transaction in court

Canada wind farm. Author: Wilson Hui. License: Creative Commons

April 24 (Renewables Now) - One of the largest shareholders of TransAlta Corp (TSE:TA) has initiated legal action against the company in an attempt to block a proposed partnership with Brookfield Renewable Partners LP (TSE:BEP.UN).

Investment manager Mangrove Partners, owner of 7.1% of TransAlta’s outstanding shares, announced on Tuesday that it has launched an action in the Ontario Superior Court of Justice against the Calgary-based utility, its directors and Brookfield BRP Holdings (Canada). Mangrove is unhappy with a deal signed in March between TransAlta and Brookfield Renewable Partners that envisages a CAD-750-million (USD 557m/EUR 497m) capital injection by the renewables arm of Brookfield Asset Management Inc (TSE:BAM.A) that would eventually give the investor possession of TransAlta’s Alberta hydropower assets. This could happen after December 31, 2024, if Brookfield Renewable Partners decides to convert certain exchangeable securities.

Mangrove sees this planned move as “rushed, defensive and improvident”. It is seeking relief under the oppression remedy provisions of the Canada Business Corporations Act, asking the court to set aside the transaction.

"The TransAlta board has made every effort to obscure the true process by which the Brookfield transaction came to pass and their motives for entrenching themselves at the expense of shareholders," said Nathaniel August, president and portfolio manager at Mangrove Partners. August also attacked TransAlta’s chairman Gordon Giffin, saying that the company has generated “disastrous” total shareholder returns during Giffin’s tenure.

“Consequently, we intend to withhold on all three Special Committee directors up for election, as we also seek relief in the Ontario Courts to set aside an improvident and self-interested transaction, and protect the rights of all shareholders," August concluded.

Giffin responded in a separate statement, saying that Mangrove’s claim “is without merit and is simply the latest complaint in a string of frivolous tactics.” He encouraged shareholders to vote in favour of all 12 TransAlta director nominees at the annual and special shareholders' meeting that will be held on Friday, April 26.

TransAlta’s agreed partnership with Brookfield aligns with the utility’s strategy to focus on converting coal units to gas and investing in renewables. It says it already is one of Canada's largest producers of wind power and Alberta's largest hydropower producer.

(CAD 1.0 = USD 0.743/EUR 0.663)

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Ivan is the mergers and acquisitions expert in Renewables Now with a passion for big deals and ambitious capacity plans.

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