Seneca Capital urges TransAlta to hold auction

By Jeffrey Jones

CALGARY, Alberta (Reuters) - Another large TransAlta Corp TA.TO investor has mounted efforts to boost the Canadian power producer's value, urging the company to auction itself off days after private U.S. firms proposed a C$7.8 billion ($7.7 billion) takeover.

Seneca Capital, a New York-based investment fund with about 3 percent of TransAlta's shares, said the company should weigh a sale process along with taking on a strategic partner or restructuring its long-term electricity contracts.

The investor made the recommendations in a letter to TransAlta's special board committee, formed this weekend after LS Power Equity Partners and Global Infrastructure Partners said they aim to buy TransAlta for C$39 a share.

LS Power and Global Infrastructure, which own 9 percent of TransAlta shares, made their proposal public on Monday, saying the firm's value is not reflected in the stock price and it should be taken private.

"As part of its strategic review, the special committee should engage a globally recognized independent financial advisor with the mandate to explore a range of strategic alternatives and then act expeditiously to execute the optimal strategic path," Seneca said in the letter.

It also said TransAlta should restructure its management pay packages to add stock option grants as a way to align executives' interests with investors'.

"We believe that the July 21st proposal and the continued disconnect between the company's share price and intrinsic value, clearly demonstrate that the status quo is not a viable option," Seneca said.

The investment fund declined further comment.