Clinton Group & Mangrove Partners: Sell Yourself Atlantic Power (AT) by Stock Pucker
When there’s two activist pushing for a sale, it makes you really want to love Atlantic Power. Even though, one activist is Clinton Group, and the other a PE firm, Mangrove Partners. In any case, it’s a torrid high risk/low reward play.
Clinton (owning 2%) sent a letter to Atlantic Power last year, calling for an outright sell, thinking the company could get $4+ a share – the key being that Atlantic cannot remain profitable as an independent entity.
Mangrove is now in on the action, active this month with a 7.5% stake. It wants the electric company to pay a buyback – using its $350mm or so from the sale of its wind assets. It also wants to explore further asset sales and an outright sale.
Charlie Munger: Invert And Use “Disconfirming Evidence”
Using cash for buybacks at this point seems imprudent. The rise of fuel input costs has hamstrung Atlantic – leading to the dividend cut in 2013 and the stock down from $15 to $3/share. We still have $1.4bn on a $400mm market cap. The board has already said they received no offers above the market price last fall when trying to sell themselves. Clinton’s deal of finding a buyer at $4+ a share is just 25% upside. But it’s still going to be hard to find a buyer and given the non-regulated power business is broken they’ll continue to bleed cash.