Drax Group has received an approach from a consortium comprising International Power plc and Mitsui & Co Ltd (together “IP/Mitsui”), in connection with an indicative offer for Drax power station.
Based on IP/Mitsui’s assumptions on net debt and the value of an equity participation offered as part consideration, the proposal represents a price for the Linked Securities (A2, A3 debt and equity) of 350% and an implied enterprise value of approximately £2.0 billion. This price compares with the traded price of approximately 393% as at close of trading on 17 October (being the last trading day before the date of IP/Mitsui’s proposal). The Drax board believes that the IP/Mitsui’s proposal significantly undervalues the company.
The indicative approach is to acquire 100% of the equity of Drax and contemplates the full repayment of A1, A2, A3 and B debt. The offer to shareholders would be a combination of cash and equity. The cash element would come from IP/Mitsui and from new debt facilities to be arranged by them for Drax. The equity element would represent a 20% participation in IP/Mitsui’s bidding vehicle. The proposal is subject to a number of conditions, including due diligence, financing and IP shareholder approval, and would be an alternative to Drax’s own refinancing and listing proposal.
All seriously interested parties who may be considering making an approach are being asked to provide final proposals to a common timetable by early November 2005. IP/Mitsui have agreed to participate in the process on this basis.
This timetable will allow the company to evaluate proposals against each other and against the proposed refinancing and listing, while giving interested parties as much time as practicable to submit firm offers.
In the meantime, the board intends to proceed with the refinancing and listing of Drax in accordance with the current timetable. The next step was the publication of the scheme documentation by the end of October 2005.