American activist files suit to head off $750M TransAlta-Brookfield deal

An American activist investor trying to force change at TransAlta Corp. has launched a lawsuit to try to derail the power utility's $750-million partnership deal with Brookfield Renewable Partners.

The filing in Ontario comes after New York-based Mangrove Partners last week withdrew an application to the Alberta Securities Commission for a hearing to demand a shareholder vote on the Brookfield transaction.

It had also asked for a delay in TransAlta's annual meeting, set for Friday, at which the company plans to ask shareholders to elect Brookfield nominees to its board of directors as a condition of closing the agreement.

• Activist investors to withhold votes from key TransAlta directors

In a news release, Mangrove president Nathaniel August accuses the TransAlta directors of attempting to entrench themselves at the expense of shareholders by obscuring the true process of the Brookfield transaction.

TransAlta CEO Dawn Farrell has defended the Brookfield deal as very good for shareholders previously and insisted the company thoroughly investigated other options before signing.

• CEO defends TransAlta-Brookfield deal after U.S. investors seek option to cancel

Mangrove and an entity controlled by Bluescape Energy Partners had agreed to join forces to use their combined 10.1 per cent ownership of TransAlta to force the examination of other financial options but they said in a regulatory filing last Friday that they had ended their partnership. Mangrove says it owns 7.1 per cent of TransAlta.

TransAlta has said it plans to spend $350 million of the Brookfield investment to speed its coal-to-gas power generation transition strategy in Alberta and will use up to $250 million to buy back shares over three years.