STG and Energy One – A Deal in the Offing?
According to a disclosure on ASX, Energy One Ltd. has received a “confidential, indicative, incomplete, conditional and non-binding proposal from global investment firm STG” – owner of Quor. According to the announcement, STG proposes to buy all of the shares in Energy One Ltd at an indicative price of $5.85AUS in cash and Energy One has entered into an expedited period of exclusivity to allow STG to complete due diligence. STG has made it quite well known that it intended to build on its acquisition of the Brady Commodities (Quor) assets and that it was looking at the market for potential acquisitions. However, the move for Energy One is perhaps just a little surprising in that Energy One is a power and gas markets player in Europe and Australasia whereas Quor is currently offers metals and commodities CTRM solutions. Neither entity has significant north American operations. The surprise is that STG isn’t trying to build on its beachhead in metals and commodities gained with the acquisition of Quor (which in turn inherited Brady’s metals market presence), but rather is expanding its footprint across broader commodities markets instead. Additionally, it looks like that puts it in direct competition with the other half of what was Brady – Brady Technologies. However, that is not to say that STG hasn’t other possible M&A activity planned to build on the Quor aspect of its business.
Of course, the deal is not final and we know of it officially only as a result of Energy One’s public status (although, we were aware for some time of a potential deal involving Energy One though without knowledge of the suitor via multiple inbound inquiries to us from various PE firms over the last several months!). According to the announcement, Energy One Ltd “decided to engage with a small number of parties regarding their interest in the business to determine whether an approach would appropriately value the company and maximise shareholder value.” The announcement follows on with “During this period of engagement, select parties were provided with access to management and comprehensive information. STG participated in this process and the indicative proposal is based on the extensive due diligence that they have conducted to date.” The Board of Energy One Ltd says that they feel “that the indicative Proposal, if formalised into a binding offer, represents compelling value to shareholders” at a 44% premium to its closing price on 25th August.
The Indicative Proposal is conditional on completion of confirmatory due diligence, execution of a binding scheme implementation deed and standard final internal approvals from STG’s Investment Committee and the Board of Energy One Ltd, according to the announcement. If STG makes a binding offer it will also be subject to several other hurdles including investment approvals in Australia and the UK, for example. Energy One also notes that there is no certainty that the parties will enter into binding documentation or a transaction of any kind will materialise.
We will continue to track the potential of the deal with considerable interest at ComTech and will reach out for comments from both parties at the appropriate time.
