Australian gas pipeline group APA accepts CKI’s $9.5bn takeover offer

The Hong Kong giant’s bid is subject to approvals from the FIRB and the ACCC regarding foreign investment and competition concerns, which could force a divestment of assets.

Australian gas pipeline company APA Group has accepted a takeover bid from Hong Kong-listed CK Group worth A$13 billion ($9.5 billion; €8.3 billion).

CK Infrastructure Holdings is leading the takeover consortium, which also includes CK Asset Holdings, a separate listed entity, and Power Asset Holdings, in which CKI holds a 38.01 percent stake. The takeover agreement will see APA shareholders receive A$11 per share, a 33 percent premium to the last unaffected trade price of APA’s securities, which stood at A$8.27 per share on 12 June 2018.

APA owns and operates 15,000 kilometres of gas pipelines in Australia, connecting to 1.3 million homes and businesses and delivering about half of the country’s gas.

The deal follows CKI’s initial proposal made on 13 June but is still subject to clearance from both the Australian Competition and Consumer Commission and the Foreign Investment Review Board. The deal is the first to be examined by the Australian government’s Critical Infrastructure Centre, according to local media reports.

As well as FIRB and CIC consideration, competition concerns are expected to be a major stumbling block for the deal. CKI offered to divest several assets in Western Australia including the Goldfields Gas Pipeline, Pamelia Gas Pipeline and Mondarra Gas Storage Facility, but the ACCC could potentially force it to offload some of its more attractive East Coast assets as well.

Depending on the progress of regulatory approvals, a meeting of APA shareholders will be held in late November 2018 to vote on the offer, with implementation and payment to APA shareholders scheduled for mid-December 2018.

Efforts have been made to pull together a consortium of Australian investors to launch a rival bid for APA, which could still be positioned to step in should CKI’s bid fail to clear regulatory hurdles.

APA’s directors unanimously recommended that shareholders vote in favour of CKI’s bid, with chairman Michael Fraser describing the offer as “compelling”.

In a statement, CKI deputy managing director Andy Hunter said: “The consortium’s binding proposal provides an attractive and compelling opportunity for APA securityholders to realise certain value for their securities while delivering additional benefits to the broader Australian energy sector, including commercial and domestic gas users.

“CKI is strongly supportive of the Australian government’s energy policy objectives, particularly as they relate to the availability, reliability and affordability of energy for Australian businesses and consumers.”

CK Group first invested in Australian infrastructure in 1997, and has investments today in electricity and gas distribution, gas transmission pipelines, electricity generation, and renewable energy power transmission businesses. It acquired DUET Group after being knocked back by FIRB in 2016 for New South Wales electricity distributor Ausgrid due to national security concerns.