JPMorgan-advised Fund Secures Controlling Stake in Falck Renewables

Italy’s Falck family of industrial magnates will receive 1.5 billion euros ($1.8 billion) from the sale of its controlling stake in Falck Renewables to a JPMorgan-advised infrastructure fund, the company said on Wednesday.

The Falcks, who built their fortune in steel over the last century before switching to renewables in the late 1990s, are selling due to the investments and know-how needed for a “big pipeline” of projects, according to media reports.

Falck Chief Executive Toni Volpe said in a call the arrival of Infrastructure Investment Fund (IIF) as a long-term shareholder was good news.

“It’s a concrete possibility to reinforce our leadership position in the renewable energy sector,” he said.

Under the agreement, IIF, which is advised by JPMorgan Investment Management but has an independent board, will pay 8.81 euros ($10) per share to buy a 60% stake in Falck Renewables, the statement said.

It will then launch a mandatory buyout offer at the same price, which broker Equita said showed that interest for renewables was “very strong” even after large investments in the sector in recent years, leading to a “significant M&A premium.”

IIF is paying a premium of 29.2% to the three-month weighted average price of the stock.

Shares in Falck Renewables jumped 14% to 8.705 euros in mid-morning trading in Milan on Wednesday. The accord drove shares in rival ERG (ERG.MI) up 6.3%.

“In the event of Falck’s de-listing, we believe ERG could benefit from the reinvestment flow of Falck’s liquidity positions, as well as from a greater repositioning in the relevant ESG indices,” Equita’s analyst Roberto Letizia said.

Italy’s Garrone family, which controls 55.6% of ERG through holding company San Quirico has no plans to sell despite having been approached by investment bankers, a person close to the matter said, according to media reports. ERG declined to comment.

The IIF transaction gives Falck Renewables an enterprise value of around 3.4 billion euros based on Reuters calculations, taking into account net debt worth 812 million euros at June 30.

Falck Renewables has an installed capacity of 1,320 megawatts in Britain, Italy, United States, Spain, France, Norway and Sweden.

The closing of the deal is expected in the first quarter of 2022, with the final aim of delisting the group from the Milan market, the company said.

Volpe said the deal was subject to a series of conditions, including clearance by the Italian government under so-called “golden power” rules.

Rothschild & Co. and Vitale acted, respectively, as advisers to Falck Renewables and Falck SpA, while Evercore acted as IIF’s financial adviser. Giliberti Triscornia e Associati, Advant NCTM, Cleary Gottlieb Steen & Hamilton, Freshfields Brukhaus Deringer and Clifford Chance were legal advisers on the deal.