Canadian Biomass Magazine

Drax Group to acquire Pinnacle Renewable Energy

February 8, 2021
By Pinnacle Renewable Energy

Pinnacle Renewable Energy Inc. is to be acquired by the Drax Group. An arrangement agreement between the two companies will see Drax acquire all of Pinnacle’s issued and outstanding common shares in an all-cash transaction valued at $831 million, which includes the assumption of net debt and Pinnacle’s non-controlling interests in its joint ventures.

Under the terms of the agreement, Pinnacle shareholders are entitled to receive C$11.30 per share in cash, which represents a premium of approximately 13 per cent to the closing price and 15 per cent to the 20-day volume-weighted average price of Pinnacle shares on the Toronto Stock Exchange on Feb. 5, 2021 and a premium of approximately 33 per cent to the closing price of Pinnacle shares on the TSX on Dec. 4, 2020, the last trading day before Pinnacle and Drax entered into an exclusivity agreement.

Pinnacle CEO Duncan Davies said, “Pinnacle’s board of directors has unanimously determined that the transaction represents the best course of action for the company and its shareholders. On closing, the transaction will deliver immediate, significant and certain cash value to our shareholders. At the same time, the combination of Pinnacle and Drax will create a global leader in sustainable biomass with the vision, technical expertise and financial strength to help meet the growing demand for renewable energy products around the world.”

Gregory Baylin, chair of Pinnacle’s board of directors, added, “The transaction is a testament to the hard work of Pinnacle’s management team and employees in building the strong business we have today. We believe the transaction represents attractive value for our shareholders and positions the business for continued success for the benefit of our customers, suppliers, and other stakeholders.”


Drax CEO Will Gardiner remarked, “I am excited about this deal which will reinforce Drax’s position as the world’s leading sustainable biomass generation and supply business, delivering against our strategy to increase self-supply, reduce our biomass production cost and create a long-term future for sustainable biomass. We expect to benefit greatly from Pinnacle’s operational and commercial expertise, and I am looking forward to what we can achieve together.”

Transaction details

The transaction will be implemented pursuant to a plan of arrangement under the Business Corporations Act (British Columbia), and is subject to the approval of at least two-thirds of the votes cast by holders of Pinnacle shares present in person or represented by proxy at a special meeting of Pinnacle shareholders to be called to consider the transaction (the “Pinnacle Special Meeting”). Pinnacle’s largest shareholder, ONCAP Investment Partners II L.P. and its related entities (“ONCAP”), together with Pinnacle’s directors and senior officers, who collectively with ONCAP own approximately 36 per cent of the outstanding Pinnacle shares, have entered into voting support agreements with Drax pursuant to which, among other things, they have agreed to vote all of the Pinnacle shares owned or controlled by them in favour of the Transaction at the Pinnacle special meeting.

The payment by Drax of the consideration to Pinnacle shareholders pursuant to the transaction is also subject to the approval by a majority of the votes cast by holders of Drax shares at a general meeting of Drax shareholders (the “Drax Meeting”).

Under the arrangement agreement, Pinnacle has agreed to suspend the declaration of its dividends on Pinnacle shares for the first quarter of 2021.

The arrangement agreement provides for customary non-solicitation provisions on the part of both Pinnacle and Drax, subject to “fiduciary out” rights. Pinnacle has agreed to pay Drax a termination fee of C$12,500,000 and Drax has agreed to pay Pinnacle a reverse termination fee of C$25,000,000 if the arrangement agreement is terminated in certain circumstances. Drax has also agreed to make an expense reimbursement payment to Pinnacle of C$5,000,000 if the arrangement agreement is terminated as a result of the Drax shareholders not approving the transaction at the Drax meeting.

In addition to Pinnacle and Drax shareholder approvals, the transaction is subject to other closing conditions including governmental and regulatory approvals as well as the approval of the Supreme Court of British Columbia. The transaction is not subject to a financing condition and is expected to close in the second or third quarter of 2021.

The summaries contained herein are qualified in their entirety by the provisions of the Arrangement Agreement, which will be publicly filed by the company under its profile on SEDAR at As well, additional information regarding the terms of the arrangement agreement, the background to the transaction, the rationale for the recommendations made by the special committee and the Pinnacle board of directors and how shareholders can participate in and vote at the Pinnacle special meeting will  be provided in the management information circular for the Pinnacle special meeting, which is expected to be held in early April 2021, which will be filed under the company’s profile on SEDAR at Shareholders are urged to read these and other relevant materials when they become available.

Fairness opinions and Pinnacle board of directors recommendation

Pinnacle’s board of directors, on the recommendation of a special committee of independent directors and in consultation with its financial and legal advisers, has unanimously determined that the transaction is in the best interests of the company and fair to Pinnacle shareholders and is recommending that Pinnacle shareholders vote in favour of the transaction at the Pinnacle special meeting.

CIBC Capital Markets and Scotiabank have each provided a fairness opinion to the special committee and board of directors that, as of the date of the opinions and based upon and subject to the assumptions and limitations described in their respective opinions, the consideration to be received by holders of Pinnacle shares pursuant to the transaction is fair, from a financial point of view, to such holders.

ONCAP information

Entities related to ONCAP Investment Partners II L.P. collectively own or control (directly or indirectly) an aggregate of 10,422,463 Pinnacle shares, representing approximately 31 per cent of the outstanding Pinnacle shares. These entities have entered into a support agreement with Drax pursuant to which they have agreed to vote in favour of the transaction at the Pinnacle special meeting.  In accordance with applicable Canadian securities laws, these entities will file an early warning report in respect of the foregoing matters on Pinnacle’s profile on SEDAR at

About Pinnacle

Pinnacle is the second largest producer of industrial wood pellets in the world.  The company’s products are used to displace fossil fuels in the production of baseload electrical power in key markets around the world. The company operates nine production facilities in Western Canada and one in Alabama, with one additional facility under construction in Alabama and more in development. The company also owns a port terminal in Prince Rupert, B.C. Pinnacle has entered into long-term, take-or-pay contracts with utilities in the U.K., Europe and Asia that represent an average of 99 per cent of its production capacity through 2026.

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