Capstone Confirms It's Working With Banks to Explore Options

  • Infrastructure firm's shares dropped 25% in year to Friday
  • Potential suitors include Brookfield, Alqonquin Power

Capstone Infrastructure Corp., the Toronto-based power and utility company, confirmed that it’s working with bankers to review various alternatives.

The firm, which had a market value of about C$302 million ($226 million) based on Friday’s close, hired Toronto-Dominion Bank and the Royal Bank of Canada to advise on the process, according to a statement Monday.

Shares of Capstone climbed 10 percent to close at C$3.35 Monday in Toronto, making their largest single-day gain in almost four years.  

“While such review is ongoing, no assurance can be given that any action will ultimately be taken in connection with such review,” Capstone said in the statement. The company doesn’t plan to comment any further.

Capstone oversees a portfolio of infrastructure businesses ranging from gas co-generation, wind, hydro, water and biomass power-generating facilities. It has operations across Canada and in the U.K. and Sweden. Potential suitors for Capstone include Brookfield Asset Management Inc. and some Canadian pension and infrastructure funds, according to people familiar with the situation, who asked not to be identified because the information is private.

Larger utilities that are involved in power generation as well as regulated utilities may also have some interest in the company, such as Algonquin Power & Utilities Corp., said Rupert Merer, a Toronto-based analyst with National Bank Financial.

“It is a bit of a diversified basket, which would tend to suggest that only the larger diversified utilities would acquire them,” he said in a telephone interview.

Representatives from TD, RBC and Brookfield declined to comment. A spokesperson for Algonquin didn’t return calls for comment.

The company’s shares dropped about 25 percent in the 12 months through Friday, after it was handed an unfavorable rate decision for its Bristol Water business last December that affected its guidance for the year.

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