Caisse declines to match APA’s new bid for Hastings fund

APA is now offering between A$1.35bn and A$1.39bn to take over the Hastings Diversified Utilities Fund. Canada’s Caisse de depot et placement du Quebec and Utilities Trust of Australia said they have no plans to increase their A$1.29bn offer for the vehicle.

It appears that APA, Australia’s largest natural gas operator, is on the threshold of delivering the knockout blow that could win it the Hastings Diversified Utilities Fund (HDF), following an increased offer for the vehicle that won’t be matched by a rival bidder.

APA upped the ante for HDF, managed by Hastings Funds Management, with last week’s offer of A$0.72 (€0.61; $0.75) in cash and 0.39 APA securities per HDF share, valuing HDF at A$2.53 per share, or A$1.35 billion. The revised offer is superior to Pipeline Partners Australia’s (PPA) A$2.43 per share bid, which values HDF at A$1.29 billion.

But APA’s new offer gets even sweeter if 90 percent of HDF’s shareholders accept it. In that case, APA is prepared to increase the cash component of its bid to A$0.80, raising its offer for HDF to A$2.61 per share, or A$1.39 billion. APA already owns 21 percent of HDF.

Following APA’s announcement last week, a subcommittee of Hastings directors told PPA –  a consortium of Canada’s Caisse de depot et placement du Quebec and Utilities Trust of Australia – that APA’s bid was superior to PPA’s, and invited PPA to match or beat it. But in a statement today, PPA said it “has no intention of exercising its matching right”.

The Hastings’ directors announced they would now meet to consider these new developments and issue a recommendation. Previously, the directors had recommended PPA’s bids for HDF, noting that their all-cash nature gave them more price visibility in relation to APA’s mixed scrip/cash bids.

Bidding for HDF – which manages two gas pipelines that serve Moomba, Australia’s principal onshore gas hub – has been fierce. But up until now, APA had been mainly fighting a losing battle, with PPA bettering its bids and Hastings’ directors successively refusing to recommend its takeover proposals.

To take over HDF, APA had to pledge to the Australian regulator that it would sell one of its pipeline assets, allaying concerns that it could end up owning all the major gas pipelines outside of Western Australia and that competition would suffer.