LONDON (Reuters) - A proposed merger between clean energy companies Trading Emissions and Leaf Clean Energy will not proceed after they failed to secure the backing of a major shareholder, the companies said on Friday.
With a combined market capitalization of over $500 million, the merger would have created the world"s largest publicly traded carbon offset aggregator. "The Board is disappointed that despite a majority of approximately 62 percent of votes cast being in favor of the merger, the transaction ... requiring 75 percent approval, will not now go ahead," Trading Emissions said in a statement.
"This is the result of one major shareholder withdrawing their support during the offer period."
Analysts said the deal undervalued Trading Emissions" shares, which rose by 3 percent to 86 pence on the news, but dropped back to stand down 1.2 percent in early afternoon trade.
Leaf Clean shares lost as much as 17 percent to 52 pence, but recovered most of the losses after announcing a buyback of up to $27 million. At 1312 GMT they were quoted down 3.2 percent.
Trading Emissions said last Friday that Moore Capital, which holds 16 percent of Trading Emissions voting rights and 3.3 percent of Leaf Clean voting rights, had told both boards it would not back the merger after previously saying it did.
Scottish Widows Investment Partnership, which holds 8 percent of Trading Emissions shares, had also said it would vote against the merger, while INVESCO Asset Management, the largest shareholder in both companies at 32 percent each, according to Reuters data, was in favor of it.
In December, Leaf Clean, which invests in clean-energy companies mainly in North America, agreed to merge with closed-end fund Trading Emissions, which generates carbon credits by investing in projects in emerging countries under the Kyoto Protocol climate pact.
Investors were hoping Trading Emissions would wind itself up when Kyoto expires at the end of 2012, and return over $250 million in cash to shareholders.
"Whilst (the merger) presented an opportunity to quickly enter North America, the company is still committed to pursuing this market and will now target investments in the U.S., Europe and Asia to build a truly global carbon-focused business," Trading Emissions added.
Leaf Clean, which runs a portfolio of 11 clean energy investments worth $200 million, said it would commit up to $27 million to a reverse auction share buyback with a maximum price of 65 pence.
The board said it could buy back around 17.6 million shares, and would consider purchasing a further $20 million in shares.
(Reporting by Michael Szabo, editing by Will Waterman)
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