Mockumentary: This is Western Wind

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Tom Konrad CFA

Windstar wind farm
The Windstar Wind Farm. Photo credit: Western Wind Energy

If the sale of Western Wind Energy Corp (TSXV:WND, OTC:WNDEF) were a movie it would be a satire like This Is Spinal Tap, the 1984 Rob Reiner classic Mockumentary profiling a “Heavy Metal band on the verge of spontaneous combustion.”

I doubt any wind turbines are about to spontaneously burst into flame, but the news keeps getting weirder.

First, there was the hedge fund (Savitr) which began pressuring management to put the company up for sale after Western Wind huffily refused an unsolicited C$2.50 per share offer from Algonquin Power (TSX:AQN, OTC:AQUNF) late last year.  This pressure included personal attacks and dirt digging on the part of a private eye (not necessarily connected to Savitr) who claimed to be able to connect Western Wind’s CEO, Jeff Ciachurski with criminal elements.

Ciachurski played his part as rock diva well, displaying a thin skin and hot temper (at least by the standards of corporate press releases.)  First, he dismissed the Algonquin offer out of hand as “extremely low-ball,” and only formed a special committee to consider formal offers under pressure two weeks later.  Quite possibly not wishing to be part of the drama, Algonquin dropped its informal offer a week later, and the special committee was apparently wound up after having considered a grand total of zero formal offers.

In August, after Western Wind’s stock had plummeted into the low C$1 range by the negative rumors circulating about management and an unexpected cut in a Federal tax grant, Ciachurski gave Savitr what he thought the fund wanted: he put the company up for sale.  But even that did not go smoothly, with Savitr keeping up the pressure by running their own slate for the board of directors, with the stated goal of doing exactly what Ciachurski & Co. were already doing: selling the company to the highest bidder.  Accusations continued fast and thick on both sides, with each impugning the other’s willingness and ability to get the best deal for shareholders.

In September, Brookfield Renewable Energy Partners (“Brookfield”, TSX:BRP.UN, OTC: BRPFF) entered the fray, signalling its intention to bid for Western Wind by acquiring the 18.6% of shares and warrants owned by the company’s largest shareholder and the voting rights which went with them.  At the time, I thought Brookfield’s motivation was to influence the outcome of the proxy battle, perhaps calculating that it could get a better deal out of the eager to sell Savitr than the reluctant salesman Ciachurski.

Today, that intuition was proved correct.  According to a company press release, Brookfield has not been participating in management’s sale process, and has instead attempted to form its own bilateral agreement with Western Wind.  Brookfield representatives also appeared at the company’s annual meeting in the company of the dissent board backed by Savitr.  Since Ciachurski successfully saw off the proxy challenge, Brookfield made it’s own informal offer (again at C$2.50) on Friday, having refused to sign the non-disclosure and standstill agreements signed by the other participants in the auction process, some of whom the Company claims have already (informally) expressed willingness to pay considerably more than C$2.50 a share.

Perhaps all the drama is more of a low-brow made-for TV movie than classic Mockumentary, but the box office returns in the form of the stock’s reaction today (up 12% at C$2.72) have been quite good.

Disclosure: Long WNDEF, AQUNF, BRPFF

This article was first published on the author’s blog, Green Stocks on November 26th

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.


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