DUBAI (Reuters) - Abu Dhabi Power Corporation (ADPower) plans to take control of Abu Dhabi National Energy Co (TAQA) TAQA.AD in an asset swap deal that would value it at 4.16 billion dirhams ($1.13 billion) and create a combined utility with assets worth $54.5 billion.
ADPower, a public joint stock company that owns most of Abu Dhabi’s water and electricity assets, said on Monday it would transfer the majority of its water and electricity generation, transmission, and distribution companies to TAQA in return for 106,367,950,000 convertible shares in the latter.
After the conversion - contingent on the asset transfer being made - ADPower would own 98.6% of the entire issued share capital of TAQA, in which the Abu Dhabi government currently has a 74.1% share.
ADPower, wholly owned by the Abu Dhabi Development Holding Company, said its offer implies an equity value for TAQA of 4.16 billion dirhams, which corresponds to an over 40% premium to its current market cap of 2.9 billion dirhams.
TAQA’s shares soared nearly 15% on the news to 0.55 dirhams in its biggest intra-day gain since last June and its second largest in more than four years.
The jump comes after a long time of sluggish performance - its shares were still down by more than 50% year on year on Monday.
Oil-rich Abu Dhabi has seen some of its largest firms merge in the last few years in response to an earlier oil price slump.
ADPower, which has Citigroup and Rothschild as financial advisers, said it plans to maintain TAQA’s existing listing, making the combined group one of the largest companies on the Abu Dhabi Exchange.
“On the basis that the transaction completes, it is our intention to increase the free float of the company through a follow-on public offering,” said ADPower CEO Jasim Husain Thabet.
The terms of the transaction - subject to the approval of various entities including the Abu Dhabi Department of Energy - will be finalised in the first half of this year, TAQA said in a separate statement.
Abu Dhabi Development Holding Company last year incorporated several state-owned firms with operations ranging from airports to power supply.
The holding company will be able to raise debt for its units, which can also raise debt themselves rather than through the department of finance, separating them from the emirate’s own debt plans, Reuters reported last year.
Reporting by Davide Barbuscia; editing by Kenneth Maxwell and Jason Neely