08 September 2020

Squeeze-out at Alpiq Holding AG: the cash compensation amount is being judicially reviewed

by Attorney-at-law Martin Arendts, M.B.L.-HSG

At the formerly listed Swiss energy group Alpiq Holding AG, based in Lausanne, minority shareholders were recently excluded (in a squeeze-out merger, permitted under Swiss law when the 90% threshold is exceeded). A merger between Alpiq Holding AG and Alpha 2020 AG was approved by the general meetings of both companies in June 2020. The compensation of just CHF 70 per Alpiq share was confirmed by auditing firms PwC and Alantra as appropriate.

Alpiq investors Knight Vinke and Merion Capital, two private equity firms, have filed lawsuits, asking the court to review the amount of the cash compensation for the squeeze-out. As there is no procedure in Switzerland that corresponds to an appraisal procedure, a so-called compensation action (Ausgleichsklage) under the Swiss Merger Act (Fusionsgesetz) has to be filed within two months after publication of the merger decision. The two plaintiffs want a significantly higher payment of at least CHF 140 (Knight Vinke) or CHF 130 (Merion) per Alpiq share.

In an recent interview with the Swiss newspaper "Finanz und Wirtschaft", Knight Vinke described the offered amount of CHF 70 per share as clearly too low. This amount did not reflect the full value of the company. Knight Vinke mentions Alpiq's hydropower plants as an example. These were among the most valuable systems in the world, but were not rated accordingly. According to Knight Vinke, the reason for this is that Alpiq holds a minority stake in most of its hydropower plants. These investments are therefore not consolidated in their financial figures. "All that you can see in Alpiq's figures is its share of net profit," said Knight Vinke in the interview. "But these plants have contracts under which they sell the electricity to the owners at cost. So their net profit is always zero." As a result, the analysts underestimated the company's value.

The delisting of Alpiq shares and the subsequent squeeze-out was carried out by three core shareholders, Schweizer Kraftwerksbeteiligungs-AG (SKBAG), EOS Holding and a consortium of Swiss minority shareholders. A ruling on this matter has effect on all minority shareholders excluded from the company as a result of the squeeze-out.

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