NEW YORK, Oct. 16, 2014 /PRNewswire/ -- Clinton Group, Inc., which together with its affiliates and funds ("Clinton Group") is an owner of equity interests in Atlantic Power Corporation ("Atlantic Power" or the "Company"), today announced that it has sent a letter to the Board of Directors of Atlantic Power criticizing the recent decision to remain independent and calling for a re-engagement of the sale process.
"Our conclusion from our due diligence is that ultimately Goldman and Greenhill were likely successful in soliciting final bids that were acceptable to shareholders like us, but unacceptable to the board," said Joseph A. De Perio, Senior Portfolio Manager of the Clinton Group. "We believe the stock price today is proof that Atlantic Power's board was misguided in their views of the prospects of the company as a standalone entity. The board has an opportunity to course correct and deliver value to its fiduciaries by re-engaging potential buyers immediately."
A complete copy of the Clinton Group's letter is below:
About Clinton Group, Inc.
Clinton Group, Inc. is a diversified asset management firm that is a Registered Investment Advisor. The firm has been investing in global markets since its inception in 1991 with expertise that spans a wide range of investment styles and asset classes.
[Clinton Group Letterhead]
October 16, 2014
Atlantic Power Corporation
One Federal Street, 30th Floor
Boston, MA 02110
Attn: Board of Directors
Ladies and Gentlemen:
I write on behalf of the Clinton Group, Inc., the investment manager to various funds and partnerships ("Clinton Group") that collectively own a meaningful stake in the common stock of Atlantic Power Corporation ("Atlantic Power" or the "Company").
As you know, the last three years of the Company's history have been difficult: among other things, shareholders have suffered as the dividend was cut 65% in March 2013 only to be followed by another 70% cut in September 2014. The business strategy under ex-CEO, Barry Welch, was a "high stakes game of poker" requiring access to both equity and debt financing markets and the execution of add-on deals to grow into the Company's high leverage and high dividend payout ratios. Obviously that strategy failed, as the stock is down more than 88% from its July 2011 high.
Given the track record of management and the underperformance of Atlantic Power's common stock versus its peers and the rest of the market, we were not surprised to read that the Company had hired Goldman Sachs and Greenhill to sell the business in May 2014. At the time, it seemed, shareholders celebrated this move, as the stock rose from $3 per share to as high as $4.38 per share in early July 2014, upon expectation of a sale.
We have studied the business strategy of industry participants and Yield Co.'s in the space and believe that there was substantial interest in the sale process conducted by Goldman and Greenhill. In conversations with equity research analysts that cover the stock, our belief is that the failure to execute a sale of the Company rested largely on a discrepancy in perceived valuation by the Board of Directors versus the final bids that came in from strategic buyers. Given the attractiveness of the Company's assets, the limited near-term expirations of the Company's PPAs, and the prevailing valuation multiples and leveragability of the strategic buyers in the space, we are confident that bids came in at least $4.00 per share. With an unaffected price of $3 per share, such bids after a competitive process should have been attractive. Apparently, the Board did not agree, yet shareholders have now clearly expressed their dismay at this decision, with the stock down 47% from the date of the announcement stating the abandonment of the process.
Fortunately, the solution is straightforward. The Board of Directors should immediately charge Goldman and Greenhill to re-engage with the potential buyers and solicit the best available deal. Given the strength of the auction as we understand it, we believe there is a deal to be achieved at prices above $4.00 per share, or over a 100% premium to yesterday's stock price.
We do not believe, in light of this, that there is any compelling reason for the Company to remain independent, recruit a permanent CEO and potentially redefine the growth strategy or deleveraging story. While asset sales may seem like an attractive strategy from a near-term deleveraging point of view, we think that strategy is a net positive to the Company's debtholders and bereft of hope for any long-term equity case. We urge you to take the right steps today to maximize shareholder value. Importantly, at this key strategic juncture, we would encourage the Board to add shareholder representation to its own body to ensure that shareholder perspectives are adequately represented in the boardroom. Time is of the essence, but the Company's Board of Directors can course correct before it is too late.
We believe many other shareholders are of like mind. We remain open to working with you in a constructive manner. I can be reached at (212) 825-0400.
Joseph A. De Perio
Senior Portfolio Manager
SOURCE Clinton Group, Inc.