CALGARY - TransAlta Corp. is the target of an American private-equity takeover valued at about $7.8 billion -- $39 per share in cash.

The Alberta-based power generator has received a non-binding approach from LS Power Equity Partners, which is a related company to hedge fund Luminus Management LLC, and Global Infrastructure Partners, a joint venture of Credit Suisse and General Electric Co.

TransAlta said its board "will carefully consider the letter and will respond in due course."

LS Power Equity Partners and Luminus -- creatures of the privately held LS Power group which is closely related to Houston-based Dynegy Inc. -- own nine per cent of TransAlta.

Luminus previously sought to shake up the utility's board, aiming to force it to sell assets and bulk up its debt to buy back shares. The hedge fund withdrew its proposed slate of directors in March after some of its demands were met, including the sale of TransAlta's power business in Mexico.

LS Power Equity Partners and Global Infrastructure Partners, both headquartered in New York, said TransAlta's head office and corporate infrastructure would remain in Alberta.

"Our transaction is business as usual for the company," James Bartlett, president of LS Power Equity Advisors, said in a telephone interview.

"The headquarters of the company are going to stay the same, management is going to be maintained, still the exact same focus on the company."

LS Power Equity Partners and Global Infrastructure Partners aim for a "consensual, negotiated transaction," he said.

The proposal is a premium of 21 per cent over TransAlta's TSX price Friday of $32.25, with a 52-week range between $37.60 and $27.07.

TransAlta shares jumped as high as $38.10 after Monday morning's news, trading later at $37.10, up $4.85 or 15 per cent.

Bartlett, a former Credit Suisse managing director who sits on the Dynegy board, said talks with TransAlta have gone on for "a relatively long period of time," including discussions in recent days.

"LS Power and Global Infrastructure Partners, as informed power-sector investors, have a long-term-investor point of view and we want to support the company," he added.

"We also very much think (TransAlta CEO) Steve Snyder is doing a good job. We're committed to retaining the current CEO and management."

Taking TransAlta private would be good for the company and all its stakeholders, Bartlett said.

"We, by the nature of being a private company versus a public stockholder, aren't worried about quarter-to-quarter earnings targets, and we think that's frankly the best way to support the company and give it the flexibilty to invest and execute over the long term."

For power consumers in Alberta and elsewhere, "it's business as usual," he stressed, and dealing with the heavily coal-dependent generator's environmental sustainability would be a key issue.

"We believe in developing sources of renewable energy, greenhouse gas solutions. And as well, like TransAlta, we believe that it's important to identify sustainable ways to increase generation capacity."

He did not specify how ownership of TransAlta would be split between LS Power and Global Infrastructure Partners, but the two "are straight-up partners in the transaction," he said.

TransAlta chair Donna Soble Kaufman stated that there has been no firm offer and shareholders need not take any action.

"At this point, we believe that management and the board will initially not want to sell the company," Desjardins Securities analyst Daniel Shteyn wrote in a commentary.

"Also, we do not see many other strategic buyers who could serve as white knights, given that most U.S. independent power producers would not have either the financial capacity or cost of capital to compete."

Shteyn noted that Canadian pension funds "have historically demonstrated an appetite for power assets" but currently are busy with other transactions such as the takeover of BCE Inc. by the Ontario Teachers' Pension Plan.

He said TransAlta may be able to provoke an auction, but "this is by no means a foregone conclusion."

TransAlta earned $33 million in its latest reported quarter, down from $56 million in the first quarter of last, year as it booked a $65-million writedown on the Mexican assets sold for $304 million in February.

Three-month revenue rose to $803 million from $669 million.

The company will release second-quarter results on July 31.

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