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Report on Business U.S. activist investors abandon effort to force TransAlta into shareholder vote over Brookfield partnership

The TransAlta logo is seen at their headquarters in Calgary, on April 17, 2019.

CHRIS WATTIE/Reuters

U.S. activist investors have abandoned an effort to persuade securities regulators to force TransAlta Corp. into a shareholder vote on the power producer’s partnership deal with Brookfield Renewable Partners LP.

New York-based Mangrove Partners and its allies have not said, however, if they are formally ending a public campaign criticizing the $750-million transaction, which they assert was rushed and prevented a possible sweeter deal for TransAlta’s hydroelectric assets.

The application to regulators was part of a multipronged campaign by the dissident group, which has more than 10 per cent of TransAlta’s stock. It had applied to the Ontario and Alberta securities commissions demanding that the annual meeting this year be pushed back to early June, so that investors could glean more details about the deal with Brookfield. They also wanted a separate vote on the arrangement.

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Last week, the OSC ruled that Mangrove’s application should be dealt with by the Alberta regulator. On Wednesday, Mangrove withdrew its application, according to a statement from TransAlta. Mangrove had no comment on what precipitated the move or what its next action might be.

Mangrove and its allies, Bluescape Energy Partners LLC and Cove Key Management LP, have said previously they intend to put forward five nominees to TransAlta’s board at the annual meeting, which will go ahead as planned on April 26.

The activists have also said they would withhold their votes for three TransAlta directors who were on the special committee that considered the deal, including chairman Gordon Giffin.

Under the deal with Brookfield, announced last month, TransAlta aims to use $350-million to speed its move to gas-fired power, and another $250-million for a major share buyback. TransAlta will use the rest for other projects. Brookfield is buying new TransAlta convertible debt and preferred stock. Each will pay 7-per-cent annual interest that will be exchangeable, in 2024, into up to 49 per cent of TransAlta’s Alberta hydro assets, based on their profitability at the time.

In addition, Brookfield is nominating two directors, Harry Goldgut and Richard Legault, to TransAlta’s board. TransAlta is also nominating Robert Flexon, former chief executive of U.S. power producer Dynegy Inc., as a director.

The arrangement has the support of TransAlta’s largest shareholder, RBC Global Asset Management, and proxy advisory firms Institutional Shareholder Services Inc. and Glass, Lewis & Co. have recommended investors vote in favour of the company’s director slate.

TransAlta chief executive Dawn Farrell has said the dissidents should favour the transaction because of the investor-friendly aspects. Mangrove has complained that the hydro assets are likely worth much more than what Brookfield is offering.

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Mr. Giffin told The Globe and Mail on Sunday that he believes most shareholders support the Brookfield deal as it is structured.

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