Drax Group plc (LSE:DRX) signed an arrangement agreement to acquire Pinnacle Renewable Energy Inc. (TSX:PL) from a group of shareholders for approximately CAD 380 million on February 7, 2021. Under the agreement, Drax Group will acquire the entire issued share capital of Pinnacle in an acquisition to be implemented by way of a statutory plan of arrangement at a price of CAD 11.30 per share in cash, and valuing the fully diluted equity of Pinnacle at CAD 385 million, with an implied enterprise value of CAD 741 million, including CAD 356 million of net debt. The all-cash transaction is valued at CAD 831 million, including the assumption of net debt and Pinnacle's non-controlling interests in its joint ventures. The acquisition is expected to be funded from cash and existing agreements. Drax Group will use the proceeds of £188 million (CAD 329.1 million) from sale of gas assets completed in January 2021 to fund the acquisition. Immediately following completion, Pinnacle will be a wholly owned subsidiary of Drax. The Arrangement Agreement provides for customary non-solicitation provisions on the part of both Pinnacle and Drax, subject to "fiduciary out" rights. Drax has agreed to pay a break-fee of CAD 25 million to Pinnacle if the acquisition agreement is terminated under certain circumstances. In addition, Drax has agreed to pay Pinnacle an expense fee of CAD 5 million in the event that the acquisition agreement is terminated as a result of a failure to obtain Drax shareholder approval. The expense fee shall not be payable in the event that the break fee is also payable. Pinnacle has agreed to pay a break-fee of CAD 12.5 million to Drax if the acquisition agreement is terminated under certain circumstances.

The acquisition remains subject to Drax and Pinnacle shareholder approval, approval of the Supreme Court of British Columbia, no material adverse effect having occurred in respect of Pinnacle, other regulatory approvals, in the event that the Competition and Markets Authority (CMA) has requested submission of a merger notice or opened a merger investigation, the CMA having issued a decision that the acquisition will not be subject to a Phase 2 reference or the period for the CMA considering a merger notice has expired without a Phase 2 reference having been made, either the receipt of an advance ruling certificate or both the expiry, termination or waiver of the applicable waiting period under the Competition Act (Canada) and, unless waived by Drax, receipt of a no-action letter in respect of the acquisition from the Commissioner of Competition, the expiry or early termination of any applicable waiting period (and any extension of such period) applicable to the acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (US), the receipt of a third party consent and execution of dissidents rights, . The transaction is not subject to a financing condition. The acquisition has been unanimously recommended by the Board of Pinnacle and has the full support and received an irrevocable undertaking from Pinnacle's shareholders holding 36% of outstanding Pinnacle shares including Pinnacle's directors and senior officers, major shareholder, affiliates of ONCAP (which, together hold shares representing approximately 31% of Pinnacle's shares). Pinnacle's Board of Directors, on the recommendation of a Special Committee of independent Directors, has unanimously recommended that Pinnacle's shareholders vote in favour of the acquisition at the Pinnacle General Meeting, as the Pinnacle directors (and certain current and former members of Pinnacle management that hold shares in Pinnacle) shall do in respect of their own beneficial holdings of Pinnacle's shares, representing approximately 4.75% of the existing share capital of Pinnacle. Drax's Board has unanimously recommended that Drax's shareholders vote in favour of the acquisition, as each of the Drax directors that hold shares in Drax shall do in respect of their own beneficial holdings of Drax's shares, representing approximately 0.17% of the existing share capital of Drax. The Pinnacle Special Meeting is expected to be held in early April 2021. The Board of Pinnacle unanimously recommends the shareholders to vote in favor of the transaction. As on March 1, 2021, the shareholders meeting is scheduled on March 31, 2021. If any of the conditions are not satisfied (or waived) by September 7, 2021, either party can terminate the acquisition agreement. As of March 31, 2021, the shareholders of Drax Group and Pinnacle approved the deal. As of April 6, 2021, Pinnacle Renewable Energy Inc obtained a final order from the Supreme Court of British Columbia approving the plan of arrangement. As of April 7, 2021, all conditions to the transaction have been fulfilled. Completion is expected to occur in the second or third quarter of 2021. As of March 31, 2021, completion of the acquisition is expected to occur in April 2021. As of April 6, 2021, completion of the transaction is expected to occur on April 13, 2021. The acquisition is expected to be cash generative with 2022 EBITDA consensus of CAD 99 million and represents an attractive opportunity to create significant value for shareholders, with expected returns significantly in excess of the Group's weighted average cost of capital. A net debt/EBITDA of around 2x is expected by end of 2022.

CIBC Capital Markets is acting as financial advisor to Pinnacle and The Bank of Nova Scotia (TSX:BNS) is acting as financial advisor to Pinnacle's Special Committee. CIBC Capital Markets and The Bank of Nova Scotia have each provided a fairness opinion to the Special Committee and Board of Directors of Pinnacle. Sean Vanderpol and Daniel Borlack of Stikeman Elliott LLP and Matthew Sinclair-Thomson, David Holdsworth of Kirkland & Ellis LLP are acting as legal advisors to Pinnacle. James Agnew, Peter Buzzi, Mark Rushton, Evgeni Jordanov, Jonathan Hardy and Jack Wood of Royal Bank of Canada are acting as financial advisors, sponsors and joint corporate brokers to Drax. Manny Pressman, Alex Gorka, Brett Anderson, Jesany Killam-Michel, Paula Olexiuk, Firoz Ahmed, Michelle Lally, Christopher Naudie, Damian Rigolo, Ryan Nielsen, Sarah Sharp, Jonathan Marin and Patrick Welsh of Osler, Hoskin & Harcourt LLP and Victoria MacDuff, Isabel Taylor and Guy O'Keefe of Slaughter and May are acting as legal advisors to Drax. D.F. King (Canada) is acting as proxy solicitor for Pinnacle Renewable. TSX Trust Company acted as transfer agent for Pinnacle Renewable.

Drax Group plc (LSE:DRX) completed the acquisition of Pinnacle Renewable Energy Inc. (TSX:PL) from a group of shareholders on April 13, 2021. The shares are anticipated to be de-listed from the Toronto Stock Exchange on or about April 15, 2021.