The companies jointly said today they have entered into a definitive pre-acquisition agreement. TransAlta plans to amend its existing share offer to acquire all the issued and outstanding common shares of Canadian Hydro for C$5.25 per share in cash, for a total value of C$1.6 billion.

The transaction is expected to be funded from new committed bank facilities underwritten by Royal Bank of Canada and from existing credit facilities and internally generated cash.

The move received unanimous support from the boards of both companies, and seems to be a fair offer, up C$0.70 a share compared to TransAlta's initial share bid of C$4.55 ($4.11) per share, which was unanimously rejected by Canadian Hydro's board in July (see TransAlta's takeover looks like it's a no go and TransAlta makes hostile $589M takeover bid for Canadian Hydro Developers).

Canadian Hydro's CEO Kent Brown told the Cleantech Group in July he would have liked to have seen TransAlta acknowledge a higher stock price than what was in the intial offer, declining to say how high. But apparently, C$0.70 more per share is high enough.

TransAlta's stock closed today up 1.44 percent at C$19.75, while Canadian Hydro's closed up 4.39 percent at C$5.23. The companies are primarily focused on developing electricity from renewables, and TransAlta is Canada's largest publicly traded utility.

In September, Canadian Hydro said it had since received a number of other offers and that TransAlta no longer had the leading proposal (see Ontario's feed-in tariff prompts 4.4 GW wind acquisition?).

However, the revised offer announced today is expected to create a combined entity with the net generation capacity of 8,657 megawatts in operation. The renewables portfolio is expected to include 1,900 MW in operation, or 22 percent of the combined portfolio. The companies said they have 543 MW under construction and nearly 500 MW in advanced-stage development.

Canadian Hydro said the revised offer provides its "shareholders with a premium and liquidity," which it's encouraging shareholders to accept.

Last week, Canadian Hydro announced it is acquiring rights to a prospective 4,400 MW offshore wind farm in Ontario from Wasatch Wind. When completed, it's expected to be the largest offshore facility in the world, with the potential to power more than two million homes (see Ontario's feed-in tariff prompts 4.4 GW wind acquisition?).

However, the purchase came under fire from a TransAlta spokesman interviewed by Canada's National Post who said he was surprised by Canadian Hydro's focus. He was quoted saying he didn't think the "highly speculative long-term acquisition" added value to Canadian Hydro's books.