PEP agrees to bring ICG and OMERS in on Zenith Energy take-private bid

The Australian fund manager agreed to a joint bid after a JV between ICG and OMERS built up a 17.61% stake in Zenith Energy and was likely to block PEP's solo bid.

Pacific Equity Partners has agreed to join forces with Australia-based Infrastructure Capital Group and Canadian pension OMERS in its take-private bid for Australian Securities Exchange-listed Zenith Energy.

The fund manager’s solo bid for Zenith Energy, which specialises in off-grid power generation, was recommended by the firm’s board in March 2020.

The deal would have seen PEP pay A$1.01 ($0.69; €0.62) per share through its Secure Assets Fund, equating to an enterprise value for Zenith of approximately A$250 million.

It subsequently emerged in April that an entity called Apex Opportunities Fund, a joint venture between ICG’s Diversified Infrastructure Trust and OMERS, had built up a 17.61 percent holding in Zenith Energy’s share register.

PEP advised that the size of Apex’s holding would make it difficult to implement its takeover if the latter voted against it and was granted permission to enter into talks with ICG and OMERS about rolling their interest into a collective takeover bid.

In an announcement to the ASX on 1 June, Zenith Energy said that Apex has now agreed to join PEP’s takeover, with the offer remaining at A$1.01 per share. The offer represents a 43 percent premium to the last closing price of Zenith Energy shares prior to the announcement of PEP’s initial offer, A$0.695.

Zenith Energy’s directors have unanimously recommended that shareholders support the takeover bid from the revised team.

In a statement, Zenith Energy chairman Peter Torre said the directors believed the deal was in the best interest of all shareholders.

“The revised Zenith 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,” he said.

“After careful consideration, the independent board committee concluded that the initial Zenith scheme was unlikely to succeed as [we] had no confidence that Apex would support that transaction. The independent board committee considered the prospect of a competing proposal was low and that therefore there was a material risk that, absent the revised Zenith scheme, Zenith shareholders would not receive the benefit of any proposal.”

The takeover is set to be implemented in August 2020 subject to shareholder approval.

If it proceeds, Zenith Energy will be the fourth asset in PEP’s inaugural infrastructure vehicle, the Secure Assets Fund, after two investments in the smart metering sector in the form of intelliHUB and Metrix, and the acquisition of last-mile utilities provider WINconnect earlier this year.

Cameron Blanks, a managing director at PEP, told Infrastructure Investor in March that the firm was “mopping up the tail end” of fundraising for the vehicle, which has a target of A$750 million.