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Boralex Inc. , one of Canada largest and most diverse renewable energy companies, has finally absorbed its income trust arm after a prolonged battle to block the deal was waged by a small fund company.

Boralex is now in the process of paying for all the units of Boralex Power Income Fund it had not already acquired, ending a process that began in May when the company first proposed the takeover. At that time, Boralex owned 23 per cent of the trust, and it operated the 10 hydro, biomass and gas power plants the trust owned, as well as 31 of its own wind, hydro and biomass projects.

But the amalgamation did not go smoothly, with many of the trust's shareholders initially cool to the offer; one of them, O'Leary Funds Management LP, took legal action to block the deal. O'Leary, which held close to 10 per cent of the trust, said the price was too low and the process of squeezing out minority shareholders who didn't tender was illegal.

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Eventually, Montreal-based Boralex enriched its offer, and 10 days ago, 86 per cent of shareholders approved the transaction. Late last week a Quebec judge rejected O'Leary's attempt to get a temporary injunction to block the deal.

Boralex spokeswoman Patricia Lemaire said that was the last hurdle and as of Monday "the acquisition is done." All that remains is to get the payments to shareholders, and to have the trust delisted from the Toronto Stock Exchange.

O'Leary said it will keep fighting because the $5 being paid for each trust unit undervalues them. Chief executive officer Connor O'Brien said his firm is exploring legal options to have the takeover reversed or its terms altered, although the fund has yet to make a decision on a specific legal strategy. "This ain't over," he vowed.

Mr. O'Brien said a key lesson underlined by this takeover is that "companies controlled by an insider have to be valued under a different set of investor standards than if a company is more broadly held."

Analysts say the prospects for Boralex are strong now that it has been simplified into one entity. Almost all of the dozen or so who follow the company have "buy" recommendations on it and one-year price targets in the $12 to $14 range, sharply above the current price of about $8.75.

Bill Cabel, of Jacob Securities Inc., said the consolidation of Boralex and the income fund clearly simplifies the structure of the two entities, eliminates some costs, and gives Boralex a broader portfolio of cash-generating renewable energy assets in Ontario, Quebec, the northeastern United States and France.

He said the main concern about Boralex now is its U.S. biomass operations. They require waste wood that is not always easily available, and sell power into an uncertain spot market, he said.

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He noted that Boralex stock rose about 4 per cent Monday, indicating the consolidation is "clearly viewed as positive by investors."









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