MONTREAL — Quebec pension fund manager CDPQ has signed a $10-billion deal to buy Innergex Renewable Energy Inc. in a bid to leave the “short-term” view of stock market investors behind.
Under the agreement, the Caisse de dépôt et placement du Québec will pay $13.75 per share in cash, amounting to a 58 per cent premium on Monday's closing price.
However, the price is less than half the company's all-time high of over $32 per share in 2021.
Innergex's main shareholder, Hydro-Québec, which approved the transaction, would also sell its stock at a loss — for $214 million less than the provincial power utility paid for its 19.9 per cent stake.
The Caisse de dépôt et placement said Tuesday it will offer $25 per preferred share, plus accrued and unpaid dividends.
The deal values the company at $10 billion, including debt, and requires a green light from shareholders and regulators.
The transaction comes at a time when the renewable energy sector has lost popularity in the wake of a backlash against environmental considerations as a focal point for investors in the U.S.
“(The Caisse) has a long-term perspective, whereas the markets unfortunately rely on the short term,” said Innergex CEO Michel Letellier in an interview.
He said renewable energy projects take years to develop, and that investors tend to value short-term profits and place less emphasis on longer-term potential.
“Stock market valuation is disconnected from the tangible value of assets,” he said in French.
Letellier insisted the outlook is good for Innergex, even if U.S. President Donald Trump inaugurates a tough patch for wind power.
“The U.S. market may be on pause, but, inevitably, we're heading for an increase in electricity consumption in the U.S. and, eventually in a change of technology, from coal to cleaner generation.”
The Longueuil, Que.-based company, which runs hydroelectric facilities, wind farms, solar farms and energy storage sites, has operations in Canada, the United States, France and Chile.
Letellier said the market outlook in Canada is “very favourable,” reiterating points he made at last week's quarterly earnings call.
CDPQ, currently Innergex's second-largest shareholder, has been a partner of the company for two decades.
Emmanuel Jaclot, head of infrastructure at the Caisse, considers Innergex a “defensive” investment that would help shield it against inflation and economic cycles.
“It can generate revenues that are very resilient, very robust, very stable, many of which are indexed to inflation. That's something that's interesting for us,” he said.
The transaction is expected to close by the end of the year. National Bank Financial analyst Rupert Merer said shareholder and regulatory approval should not be hard to obtain.
He noted that Innergex has 65 days to come up with a better offer. “There is potential for upside to the acquisition price in the event of a third-party bid.”
Merer said the price offered by the Caisse should please shareholders, but pointed out that it sits below analysts' target price of up to $16.
"We are not surprised to see further consolidation by private equity, as we believe that renewable infrastructure stocks continue to trade below fair-value," he said.
The offer shows that the gap between market values and those granted by private investors “is simply too wide,” comments Brent Stadler of Desjardins Capital Markets.
Brent Stadler of Desjardins Capital Markets agreed the offer price better reflects the fair value of Innergex's portfolio of assets, showing that the gap between market values and what the private sector will pay is "simply too wide."
However, he said he believes a competing offer is unlikely.
This report by The Canadian Press was first published Feb. 25, 2025.
Companies in this story: (TSX:INE)
Stéphane Rolland, The Canadian Press
