Federation Asset Management makes bid for ASX-listed Windlab

The fund manager will focus on the Windlab acquisition before turning to fundraising for a new vehicle, the Sustainable Australia Real Assets Fund.

Federation Asset Management has submitted an indicative non-binding proposal to acquire Windlab, a wind farm developer listed on the Australian Securities Exchange, in a deal worth approximately A$56 million ($39 million; €35 million).

The Sydney-headquartered fund manager, which already owns an 18.5 percent stake in Windlab, has offered A$1 each for all the remaining shares it does not own. The offer represents a 39 percent premium to the most recent closing price for Windlab’s shares prior to the announcement of the offer on 20 January.

Windlab has granted Federation Asset Management a period of exclusivity until 26 February to complete its due diligence and negotiate a scheme implementation agreement. Windlab said that its board intends to unanimously recommend that shareholders support the offer in the absence of a superior proposal and subject to an independent expert concluding that the offer is in shareholders’ best interest.

The offer came after Windlab announced it was undertaking a strategic review in August, after which Federation conducted discussions with the firm about a takeover and undertook initial due diligence. Federation acquired its 18.5 percent stake from Innovation Capital in September.

Federation, which was founded in 2018 and has around A$100 million in assets under management, raised a feeder fund last year to seed investments in its three business verticals: renewable energy, private equity and social real estate. In the latter category, there is a significant overlap with definitions of social infrastructure in areas such as disability housing. That fundraising closed in September last year and the firm is expected to go back to the market for more capital for the feeder fund in February.

Speaking to Infrastructure Investor, Federation co-founder and head of renewable energy Stephen Panizza said the investment would help bring Windlab’s project pipeline to fruition.

“Federation is a late-stage developer,” he said. “We invest in the ‘last mile’ of development expenditure that brings a project to financial close. Windlab has a portfolio of high-quality projects and we intend to provide the capital to bring those projects to financial close.”

Panizza said Federation intends for its new vehicle, the Sustainable Australia Real Assets Fund, to provide the capital to build those projects.

“We envision that the Sustainable Australia Real Assets Fund will in future provide the long-term capital to construct and own projects Windlab has developed, on commercial market terms,” he said.

Fundraising for SARA is set to launch in the second half of 2020 after the firm has completed the proposed acquisition of Windlab and bedded in a new business plan for it.

Federation is targeting a first close on SARA of around A$500 million, Panizza said, with an upper fundraising limit of A$1 billion. “We wouldn’t want to do more than A$1 billion if we were so lucky [to raise that amount],” he said. “I think we can deploy A$500 million to A$750 million in a sensible period of time in major assets in Australia.”

The new fund will focus on renewable energy assets in Australia initially, especially wind, but will have a mandate to invest in other sustainable infrastructure assets across Asia-Pacific.

Panizza said it could invest in behind-the-meter solar, water infrastructure (including desalination plants), energy-from-waste facilities and vertical farming assets.

“I’m very shy of utility-scale solar until four- to six-hour battery storage becomes competitive,” he said. “And there are other asset classes we might consider in the fullness of time: energy from waste in Australia is years behind Europe and sustainable assets like vertical farming are things that I think could fit into SARA. Greenhouse farming assets, as the industry matures, will too become infrastructure-style assets.”