Canadian pension giant to buy Pattern Energy for US$6.1 billion

The Canada Pension Plan Investment Board (CPPIB) has bought US developer Pattern Energy Group in an all-cash deal valued at around US$6.1 billion.

CPPIB will pay US$26.75 per Pattern Energy share, equal to a premium of about 14.8% over the stock's closing price on 9 August, the last trading day prior to market speculation about the possible deal.

The deal will make Pattern Energy, which has been publicly listed since 2013, a private company.

Pattern Energy, which is headquartered in San Francisco, owns 28 utility-scale renewable plants across Japan, US and Canada. The portfolio represents an aggregate operating capacity of 4.4GW.

In a separate deal, the Toronto pension group and buyer CPPIB – which administers a fund paid into by 20 million Canadians – agreed to merge Pattern Energy with its privately-held sister company, wind and solar developer Pattern Development (Pattern Energy Group Holdings 2 LP).

While the two companies are “structurally separate” according to the latter's website, they work in tandem. Pattern Energy has the right of first offer to buy from Pattern Development and owns an equity stake in the business. The two companies share leadership and when Pattern Energy went public in 2013, it acquired its first batch of operating assets from the developer.

Pattern Development claims to have developed 5GW of assets, the majority wind, in Canada, Mexico, Japan and the US.

CPPIB negotiated the second transaction with New York City-headquartered private equity firm Riverstone Holdings LLC, which is invested in Pattern Development and has backed Pattern in its various forms since its founding year of 2009.

The Pattern Energy purchase does not depend on the merger with Pattern Development. It is expected to close by the second quarter of 2020, subject to shareholder and regulatory approvals and other closing conditions.

The CPPIB is responsible for investing unused funds from the Canada Pension Plan, the mandatory federal pension plan paid into by all Canadians apart from residents of the province of Quebec. CPPIB’s fund totalled around CAD$400.6 billion (US$305 billion) on June 30, 2019.

Rumours have been swirling about a possible takeover of Pattern Energy ever since a Bloomberg report in August that claimed another Canadian entity, Toronto-based Brookfield Asset Management, had shown interest in merging Pattern Energy with its US renewables arm, TerraForm Power.

Evercore and Goldman, Sachs & Co. LLC are acting as independent financial advisors to Pattern Energy’s special committee. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as independent legal counsel to the special committee.