Australian investors weighing up rival APA Group bid

A local bid for Australia’s largest natural gas pipeline company would face fewer regulatory hurdles than the current $9.8bn offer from Hong Kong’s CK Infrastructure. But the size of the equity cheque required is proving daunting for local investors and GPs.

Efforts are being made to put together an Australian consortium to rival Hong Kong-listed CK Infrastructure’s bid for APA Group, sources have told Infrastructure Investor.

Several market sources said they have been contacted to sound out their interest in joining a consortium to bid for APA, an Australian gas pipeline company, with Macquarie Capital acting for APA in a defensive capacity. Were an Australian consortium able to match CKI’s bid, it is more likely to be readily accepted, sources indicated, and would face far fewer regulatory concerns. An Australian bidder could also position itself to step in should CKI’s bid fail due to regulatory issues.

IFM Investors, the Melbourne-based infrastructure manager, would be a major player in any consortium, but the size of the equity cheque required would mean it would probably require at least “two or three partners”, a GP source said.

“I’ve had calls asking if we want to participate in a consortium – the problem is, it’s such a huge equity cheque,” said one investor source. “We won’t participate in that – but if assets fall out and there becomes more discrete opportunities, we’d look at these for sure.”

Another GP source agreed with this analysis, saying the size of the equity cheque required would make it difficult for them to participate, but that were any individual assets or groups of assets to become available as part of any required disposals, it would “absolutely” be interested in bidding for those. “Everything has a price,” the source said, while adding they thought it likely that significant disposals would have to be made for CKI’s bid to clear the regulatory hurdles.

CK Infrastructure’s offer of A$11 ($8.2; €7.0) per share for APA valued its bid at A$13 billion, putting a solo bid out of reach for most Australian managers. CKI’s bid is set to face a significant regulatory battle as it will have to allay competition concerns with the Australian Competition and Consumer Commission, as well as getting over the foreign investor barriers presented by FIRB and its definition of critical infrastructure.

Both FIRB and the Critical Infrastructure Centre declined to comment on specific foreign investment cases. IFM had not responded to requests for comment at the time of publication.

CKI proposed a divestment package which could include APA’s interests in the Goldfields Gas Pipeline, Parmelia Gas Pipeline and Mondarra Gas Storage Facility, located in Western Australia, as well as a standalone management team. Market sources have questioned whether these disposals would be enough to allay the fears of the ACCC and FIRB, as CKI, as well as its consortium partners – CK Asset Holdings and Power Assets Holdings – already have substantial holdings in Australia’s energy infrastructure.