As part of Activist Strategy, this is an ad-hoc look at a current activist campaign.
When there’s two activist pushing for a sale, it makes you really want to love Atlantic Power. Even though, one activist is Clinton Group, and the other a PE firm, Mangrove Partners. In any case, it’s a torrid high risk/low reward play.
Clinton (owning 2%) sent a letter to Atlantic power last year, calling for an outright sell, thinking the company could get $4+ a share - the key being that Atlantic cannot remain profitable as an independent entity.
Mangrove is now in on the action, active this month with a 7.5% stake. It wants the electric company to pay a buyback - using its $350mm or so from the sale of its wind assets. It also wants to explore further asset sales and an outright sale.
Using cash for buybacks at this point seems imprudent. The rise of fuel input costs has hamstrung Atlantic - leading to the dividend cut in 2013 and the stock down from $15 to $3/share. We still have $1.4bn on a $400mm market cap. The board has already said they received no offers above the market price last fall when trying to sell themselves. Clinton’s deal of finding a buyer at $4+ a share is just 25% upside. But it’s still going to be hard to find a buyer and given the non-regulated power business is broken they’ll continue to bleed cash.