The Successful Investor Hotline – Friday, July 24, 2009

Article Excerpt

TRANSALTA CORP., $20.85, Toronto symbol TA, has launched a hostile takeover bid for Canadian Hydro Developers Inc. (Toronto symbol KHD). Canadian Hydro owns and operates 21 power-generating facilities in Alberta, B.C., Ontario and Quebec. These include 12 hydroelectric plants, eight wind farms and one biomass plant, which generates power by burning plant materials and wood waste from lumber mills. TransAlta is offering $4.55 a share in cash for Canadian Hydro, for a total of $654 million. That’s equal to 79% of TransAlta’s 2008 cash flow of $828 million, or $4.16 a share. Adding Canadian Hydro would increase TransAlta’s generating capacity by 9%, to 8,657 megawatts. Moreover, about 22% of that total would come from renewable sources, compared to 15% today. TransAlta uses coal to generate 60% of its electricity, so expanding its renewable-energy capacity will help it comply with the tougher environmental regulations that will likely come into force over the next few years. Canadian Hydro has rejected TransAlta’s offer. Its shares…