Unfazed by legal action, TransAlta investors elect management’s preferred board

New York-based Mangrove Partners asked Ontario court to ‘set aside’ a C$750m investment from Brookfield it alleged was ‘at the expense of shareholders’.

Shareholders in TransAlta Corporation have backed its management by electing its preferred board of directors. The vote took place after an investor brought a legal challenge to the company’s C$750 million ($557.5 million; €838.8 million) deal with Brookfield Asset Management.

TransAlta, one of Canada’s largest power producers, issued a statement on 26 April in which it said shareholders had approved the appointments of all 12 of the management’s nominees at the company’s annual meeting. Gordon Giffin, chairman of the board, called the vote an “important validation” of the management’s strategy to transition away from coal and invest in natural gas and renewables.

TransAlta had agreed to a deal with Brookfield on 25 March whereby the asset manager’s publicly listed renewables vehicle Brookfield Renewable Partners would purchase securities that could subsequently be converted into a 49 percent equity interest in hydroelectric assets.

TransAlta said it would use C$350 million from the deal’s proceeds to advance its coal-to-clean energy strategy, and that as much as C$250 million would go towards share buybacks over three years. The company plans to transition to 100 percent clean energy by 2025 – five years ahead of Alberta’s Climate Leadership Plan, which aims to eliminate all pollution from coal-fired electricity in the province by 2030.

Brookfield also committed to increasing its stake in TransAlta from 4.9 percent to 9 percent in exchange for two seats on the company’s board. In the vote, shareholders approved board membership for Harry Goldgut and Richard Legault, two vice-chairmen of Brookfield.

The vote came less than a week after New York-based Mangrove Partners, which owns 7.1 percent of TransAlta, announced legal action to stop the Brookfield deal.

In a statement released on 23 April, Mangrove said it had asked the Ontario Superior Court of Justice to “set aside” the transaction. It argued that the deal had been rushed at the expense of TransAlta’s shareholders.

“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,” Mangrove president Nathaniel August said in the statement.

Giffin said Mangrove’s claim was “without merit and is simply the latest complaint in a string of frivolous tactics”.

Around the time of the Brookfield deal, Mangrove and an entity owned by Bluescape Energy Partners agreed to use their combined 10.1 percent stake in TransAlta to force a board revamp. Their partnership has since ended. After the deal was announced, Mangrove asked the Alberta Securities Commission to delay TransAlta’s annual meeting and require a separate vote on the transaction.

Mangrove withdrew its request after what the firm called “repeated insistence” from TransAlta that it should put its claims in the courts.

TransAlta, Brookfield and Mangrove did not respond to requests for comment.