Renewable power firm Pattern Energy to be bought by CPPIB for $2.6 billion

(Reuters) - Renewable power producer Pattern Energy Group Inc PEGI.O said on Monday it agreed to be taken private by the Canada Pension Plan Investment Board (CPPIB) for $2.63 billion.

Shareholders of Pattern Energy, which owns wind and solar projects in North America and Japan, will receive $26.75 per share, according to a statement announcing the deal, a discount of about 4% to the stock’s close on Friday.

Pattern’s stock traded at $27.08 on Nasdaq around midday ET, down 2.6 percent from Friday. While the deal is subject to a 35-day go-shop process, which would allow another suitor to outbid CPPIB, Pattern Energy Chairman Alan Batkin said there had been a robust sale process ahead of Monday’s announcement.

The company said in August that it had drawn interest from potential third parties, prompting it to form a special committee to review various bids.

Pension and infrastructure funds have been investing more in the renewable energy space, given the steady returns such assets generate.

For CPPIB, this includes deals in 2018, when it bought Canadian assets from NextEra Energy Partners LP NEP.N and agreed with Enbridge Inc ENB.TO to acquire stakes in North American and German power projects concurrently and establish a joint venture for future European investments.

For the renewable firms involved, such ownership provides a regular flow of cash to fund growth and new developments.

Once the Pattern Energy deal with CPPIB closes, the statement said, it will be combined with Pattern Development, a company backed by private equity firm Riverstone Holdings LLC, to create an integrated renewable energy company that both builds and operates power assets.

Pattern Energy Chief Executive Officer Mike Garland will lead the combined entity, the statement added.

The Pattern Energy-CPPIB deal, which is expected to close in the second quarter of 2020, is valued at about $6.1 billion, including debt.

Evercore and Goldman Sachs GS.N were financial advisers to Pattern Energy's special committee, while Paul, Weiss, Rifkind, Wharton & Garrison LLP was its legal counsel. Shearman & Sterling was the legal adviser to CPPIB.

Reporting by Shanti S Nair in Bengaluru and David French in New York; Editing by Shinjini Ganguli, Anil D’Silva and Dan Grebler