Caisse strikes back with raised bid for Hastings fund

The Canadian pension, together with the Utilities Trust of Australia fund, has upped its all-cash offer for the Hastings Diversified Utilities Fund to A$1.29bn. Hastings’ directors backed the consortium’s increased bid over APA’s mixed cash/scrip offer of A$1.33bn.

Pipeline Partners Australia (PPA) – the consortium comprising Canada’s Caisse de depot et placement du Quebec and the Utilities Trust of Australia fund – tabled a higher bid yesterday for the Hastings Diversified Utilities Fund (HDF), once again winning the backing of manager Hastings Funds Management.

PPA increased its offer to take over HDF by 10.5 cents to A$2.43 (€2.06; $2.54) per HDF security, an all-cash bid amounting to A$1.29 billion. According to PPA, the offer represents a 37.3 percent premium to HDF’s closing price on December 13, 2011, when rival bidder APA submitted its first takeover offer for the fund.

A subcommittee of independent directors at Hastings Funds Management, which manages both HDF and the Utilities Trust of Australia fund, said it continued “to recommend unanimously that HDF securityholders accept PPA’s offer”.

The directors prefer PPA’s takeover bid to rival group APA’s, mainly because it is all-cash compared with APA’s mixed cash/scrip offer. Last week, APA proposed to pay A$0.62 in cash and 0.39 APA securities per HDF stock.

“The independent directors note that the APA offer includes a scrip component which creates some uncertainty in determining the APA offer price. Since APA’s announcement on August 9, 2012 of its revised offer of A$2.51 per HDF security, the implied value of APA’s offer has ranged from A$2.48 to A$2.44 per security. There is no assurance that APA’s offer will not change further in the future. In contrast, the PPA offer is all-cash and therefore provides a more certain offer price,” the directors explained.

PPA’s offer is open for acceptance until August 31.

Bidding for HDF – which manages two gas pipelines that serve Moomba, Australia’s principal onshore gas hub – has been fierce, but so far APA, Australia’s largest natural gas operator, has fought a losing battle, with 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.