Geothermal power developer Magma Energy Corp (TSX:MXY) announced that it will merge with renewable power developer Plutonic Power Corporation (TSX:PCC).
Under the terms of the Arrangement Agreement, each Plutonic shareholder will receive 2.38 shares of Magma for each Plutonic share held, and Magma will change its name to Alterra Power Corp.. The exchange ratio represents a premium to Plutonic shareholders of 32% over Plutonic’s 20 day weighted average share price on the Toronto Stock Exchange. At the conclusion of the merger there will be 470 million shares of Alterra issued and outstanding and 487 million shares on a fully diluted basis.
The new company will have a post-deal market capitalization of approximately $575 million, the companies said in a release.
The company will have power-producing assets in geothermal, hydro and wind. Its six operating plants are in three locations: two geothermal plants in Iceland and one in Nevada; two hydro plants in British Columbia; one wind farm in British Columbia; and an option on one solar project in Ontario.
"This merger will strengthen both companies and will create a larger, more diversified renewable energy company with assets across a broader spectrum of the clean energy industry," Ross Beaty, Magma’s Chairman and CEO, said. "Geothermal will remain a core focus of the new company, but hydro, wind and solar assets will be solid business platforms for future growth. In the renewable energy business, bigger is better and this combination will achieve that while enhancing returns to each company’s shareholders."
Donald McInnes, Plutonic’s Vice-Chairman and CEO said, "2010 was a breakout year for Plutonic having completed the transition into an operating company. To continue to build on the success of our history as a project developer, a merger with Magma will provide our shareholders with the best path to further value creation achieved through a larger market size, greater liquidity, better access to capital, and diversity of geography and technology with a healthy development pipeline that provides significant growth opportunities."
Completion of the merger is conditional on approval of Magma and Plutonic shareholders at special meetings expected to be held in late April 2011, and satisfaction of other customary approvals, including regulatory, stock exchange and court approvals.
Magma has subscribed for a $10 million unsecured convertible debenture from Plutonic. These proceeds will be used by Plutonic to fund working capital and repayment of a $8 million promissory note held by GE Energy Financial Services Holding Company.
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