Today global investment house Babcock & Brown (BNB) offered to buy the remaining 70% of Babcock & Brown Environmental Investments (BEI) for $18 million, offering one BNB subordinated note for every 200 shares in BEI, valuing the company at around $68 million.
This offer will take the struggling biofuel fund back onto BNB's own balance sheet, therefore offering some relief to the company's suffering shareholders.
BNB subordinated notes are listed on the ASX as unsecured, subordinated, cumulative, resettable notes issued by BNB.
The investment company said that, based on the subordinated note's closing price of $101.55 yesterday, the offer is valued at 50.8c per share, a 34 per cent premium to its last traded price of 38c last Friday, before it went into a trading holt.
At its Annual General Meeting on Monday, BEI said that this had been a disappointing year for the company, with volatile commodity and currency markets impacting upon the profitability of its activities.
Like other global biofuel producers, BEI was hurt by a jump in the price of palm olein, which is used to make biodiesel, as well as a rising price of corn, used to make ethanol.
These expenditure issues forced the company to abandon its plans to establish a biodiesel plant in Darwin.
The fund was also forced to consider selling its interest in the biodiesel company Natural Fuel Australia at a significant loss.
"The BEI Board has stated that it does not believe a company of BEI's size will have the financial resources to resolve the issues affecting its businesses and deal with the current commodity price volatility," the biofuel company said in a statement today.
"Accordingly, Babcock & Brown is proposing this offer which provides BEI shareholders with a premium to the current BEI share price, protection against further difficult operating conditions and avoids BEI's public shareholders needing to contribute further capital in these difficult circumstances."
But the bail-out bid must seem like too little too late for many BEI shareholders, whose shares have lost over 90% of their value since listing.
On May 5 2006 BEI shares were worth $3.37 each. They are now worth a paltry 48 cents.
BEI's directors have urged the fund's shareholders to take no action until they have evaluated the offer.
CEO and chairman of BEI Phil Green suggested at Monday's general meeting that a buyout by BNB was likely to "preserve the current value of BEI shares".
"There is today a major global focus on the environment but it appears that it may be too early for predictable profitable participation in our space in the near term.".
Documentation for shareholder approval is expected to be issued by the end of the year.
Shares in BNB rose by 3.4% today, before falling to close down by 25 cents at $27.60.
