Alkane Energy, which mines methane gas from redundant Yorkshire coal mines, is to be sold to Balfour Beatty Infrastructure Partners for £61m in a recommended cash deal.
Alkane shareholders will receive 36p in cash for each share they hold, a 44 per cent premium to the closing price on Tuesday.
The group’s directors said the terms of the offer are fair and reasonable and they are unanimously recommending that Alkane’s shareholders accept the offer.
Balfour Beatty Infrastructure Partners, a fund which Balfour Beatty invests in, has already received irrevocable undertakings to accept the offer from 35 per cent of Alkane’s shareholder base.
Roger McDowell, chairman of Alkane, said: “This offer enables Alkane shareholders to realise value today in cash for their shares at a significant premium to the recent historical share price, which, in the board’s view, has been impacted by negative sentiment towards the energy industry and continued regulatory scrutiny.
“BBIP have a well-respected track record in the infrastructure sector and as a patient investor, will be able to support the company’s longer term growth ambitions. We believe that the offer is a good outcome for all Alkane stakeholders.”
Rob Gregor, managing partner of BBIP LLP, investment adviser to BBIP, said: “BBIP is attracted to the flexibility and diversification of generation provided by the independent power platform of Alkane.
“We see great opportunity in the business and believe BBIP is an excellent partner to support the next phase of Alkane’s development, and thereby contribute to the security of the UK power supply.”
Rupert Hargreaves at investor adviser The Motley Fool UK said: “While the offer does represent a 59.5 per cent premium to the six-month average closing price of Alkane’s shares, it will still leave some shareholders feeling short-changed. This time last year Alkane’s shares were trading at 40p, approximately 11 per cent below today’s offer. Over the past 12 months, Alkane’s shares have slumped 44 per cent. So investors who bought into the company last year, buying with a long-term outlook have been dealt a raw deal.”
He added that increased regulatory scrutiny and negativity towards the energy industry has weighed on Alkane’s share price over the past year.
“As a result, Balfour Beatty has been able to snap up the company at a relatively low price,” he said.
“Overall, the buyout offer from Balfour Beatty does provide a quick fix for some of Alkane’s shareholders. That said, there is some evidence to suggest that the 36p per share offer undervalues the company.”
Last week Alkane reported strong annual results, boosted by an “extremely good” performance at the former Maltby Colliery.
Maltby, near Rotherham, moved into full production last summer and is now Alkane’s biggest mine with a capacity of 10MW.
Alkane’s CEO Neil O’Brien said: “We are delighted with Maltby which is running extremely well.
“The facility has been running flat out and we are testing new running regimes, generating more in weekdays and the winter and less in the summer and at weekends so we can capture top prices.”
Mr O’Brien said the strong results reflect the investment the group has made in the business.