Hastings fund opens books to APA

APA has started due diligence on the Hastings Diversified Utilities Fund. If satisfied, APA has pledged to bid A$1.33bn for the fund, trumping a rival A$1.25bn offer from Caisse de depot et placement du Quebec and the Utilities Trust of Australia fund.

Australia’s largest natural gas infrastructure operator – APA – has begun due diligence on the Hastings Diversified Utilities Fund (HDF), both parties announced in statements to the Australian regulator.

The start of due diligence comes shortly after a subcommittee of HDF’s directors recommended that HDF’s shareholders accept a rival offer from Pipeline Partners Australia (PPA), a consortium of Canadian pension Caisse de depot et placement du Quebec and the Utilities Trust of Australia. The latter and HDF are both managed by Hastings Funds Management.

PPA is offering A$2.32 (€1.9; $2.4) per HDF security, or A$1.25 billion, to take over the fund – an all-cash offer that HDF’s directors found to be in the A$2.30 to A$2.69 control premium range determined by independent expert Grant Samuel & Associates.

But APA had previously said it was willing to trump the PPA bid, subject to the requisite due diligence, with an offer of A$2.50 per HDF share, or A$1.33 billion. APA’s offer is not, however, all cash, comprising instead a cash component of at least A$0.60 per security with the remainder to be paid in APA securities. When combined with a A$0.025 per security distribution payable yesterday, APA’s offer increases to A$2.525 per share.

In a statement, HDF pointed out that “HDF securityholders should be aware that there is no certainty that a superior offer may eventuate from APA as a result of due diligence”. This is one of the reasons why HDF has recommended its shareholders accept the PPA bid.

APA has been tenacious in its pursuit of HDF, despite having been rebuffed once already by HDF’s directors and having had to pledge to sell one of its pipeline assets to appease the Australian regulator.

HDF manages two gas pipelines that serve Moomba, Australia’s principal onshore gas hub.