AGL Energy (AGK) rose by as much as 8% today after the large Australian energy company said it is selling its 33% interest in West Australian gas retailer AlintaAGL to Babcock & Brown Power's Alinta for $522 million.
AlintaAGL was created last year as a joint venture between Alinta and AGL, following a bitter takeover battle.
The recent acquisition has finally brought the struggle for ownership of AlintaAGL to a close.
AGL was offered the option of obtaining 100 percent of the assets in the company after its joint acquisition of energy infrastructure group Alinta with Babcock & Brown in September.
Babcock & Brown set the price tag at $1.06 billion, and allowed the company three months to make its decision.
AGL declined.
As a result, AGL was required to sell its stake to Babcock & Brown for a pro-rata price of $522 million.
AGL Managing Director Michael Fraser said the price represents an outstanding return for AGL in a very short period of time.
"The price offered by Alinta substantially exceeds the valuation placed on the investment by AGL and will result in a pre-tax profit of $125 million on the investment in just over 12 months."
"The transaction also demonstrates a disciplined approach to the use of capital across the business to maximise returns on investment for our shareholders."
According to AGL, the sale is expected to be immediately earnings per share (EPS) accretive; however there has been no change to AGL's revised 2008 earnings guidance of $330 – $360 million.
Paul Simshauser, CEO of Babcock & Brown was also happy with the outcome.
"AlintaAGL is an end-to-end energy business that provides strong medium-term growth opportunities in the WA market while enabling Babcock & Brown to achieve scale economies."
Mr Simshauser said the acquisition is Babcock & Brown's first major entry into the retail energy market, effectively extending the company's operations to an integrated energy business.
"Positioning in the retail sector is important as it provides Babcock & Brown with access to customer load and AlintaAGL is a firm starting point for building our retail customer capabilities."
Babcock & Brown said the acquisition would be financed from pre-existing debt facilities as part of the Alinta transaction.
Following completion of the transaction, Alinta will continue to operate under the same name in Western Australia
AGL said it anticipates that the transaction to be finalised by the end of December.
AGL rose by 37 cents to close the day up at $13.03.
