KKR agrees $3.7bn Spark Infra deal

November 2021 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

November 2021 Issue

Australian firm Spark Infrastructure has agreed to be acquired by a consortium of KKR, Ontario Teachers’ Pension Plan Board (OTPP) and Public Sector Pension Investment Board (PSP Investments) for around $3.71bn.

The deal, which is subject to the approval of the Australian Foreign Investment Review Board (FIRB), court approval, Spark Infrastructure’s shareholders’ approvals, and others, will see Spark shareholders receive AU$2.95 per share, a 26 percent premium to Spark’s closing share price on 13 July. The offer price accepted by Spark came after the consortium improved its proposal for a second time. On 14 July, Spark said that it had rejected an offer of AU$2.80 per share, which itself was an improvement on an earlier AU$2.70 per share offer.

Under the terms of the deal, Spark said it can pay a special distribution of around AU$0.12 per share held. Spark will exit the Australian Stock Exchange as a result of the deal.

“The investments we have made in distribution, transmission and renewables put Spark Infrastructure front and center of Australia’s low-emissions energy future,” said Rick Francis, managing director of Spark. “We are pleased this has been recognised in the scheme consideration agreed with the consortium.”

“The Spark Infrastructure Board unanimously recommends Securityholders vote in favour of the Schemes in the absence of a superior proposal and subject to the independent expert concluding and continuing to conclude that the Schemes are in the best interests of Spark Infrastructure securityholders,” said Doug McTaggart, chair of Spark.

In a statement, the consortium said: “We are excited to invest in Spark Infrastructure’s leading portfolio of electricity networks and help to advance its mission to provide essential energy infrastructure to the millions of customers across Australia that rely on Spark Infrastructure’s assets. The Consortium takes its role as a steward of critical infrastructure seriously and we look forward to working with our partners and stakeholders to support Australia’s energy transition and decarbonisation efforts.”

Upon completion of the transaction, the asset will be held in an unlisted entity known as PIKA Holdco. KKR and the two Canadian investors will have joint ownership of PIKA and will sit on its three-person board.

Spark Infrastructure owns electricity assets, including 49 percent of SA Power Networks, the sole operator of South Australia’s electricity distribution network. The company also has interests in CitiPower and Powercor, which distribute electricity to more than a million customers in Victoria, and 15 percent of the New South Wales transmission monopoly Transgrid.

Interest in Australian and New Zealand companies has grown significantly in recent months. In early August, US payment company Square agreed to acquire Afterpay for $29bn, marking the largest acquisition in Australia’s history. Sydney Airport has also been subject to a number of takeover bids from an Australian pension fund and a US-based global infrastructure partner.

Much of the interest in assets in the region is being driven by ultra-low interest rates, increased funding for private market allocations, and increased opportunities as the Australian government moves to address chronic underinvestment. Spark’s share price has grown more than 23 percent this year following a rebound in infrastructure spending and industrial activity in Australia.

In August, OTPP announced its net assets totalled $227.7bn as at the end of June 2021. The total-fund net return was 3.8 percent for the six-month period, while the 12-month total-fund net return was 13.2 percent. The fund earned $8.6bn in net investment income during the first half of 2021. OTPP is the administrator of Canada’s largest single-profession pension plan. PSP Investments is one of Canada’s largest pension investment managers with $162.38bn of net assets under management as of 31 March 2021. KKR reported $251.7bn in assets under management as of 31 December 2020.

Richard Summerfield