Fundraising

IFM, AustralianSuper snap up Ausgrid for A$16.2bn

The ‘all-Australian’ consortium’s unsolicited offer was chosen just two months after the government blocked bids by two Chinese suitors.

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IFM Investors and AustralianSuper have acquired a 50.4 percent stake in a 99-year lease of Ausgrid, a power grid in New South Wales, for A$16.2 billion ($12.4 billion; €11.3 billion).

The Australian asset manager and super fund had teamed up to submit an unsolicited proposal after Treasury blocked bids by a Chinese state-owned group and a Hong Kong conglomerate on national security grounds. China’s State Grid and Cheung Kong Infrastructure were the only two suitors in an auction launched earlier in the year by the New South Wales government.

IFM and AustralianSuper were chosen before a competitive process for the asset was even relaunched. Sources had previously told Infrastructure Investor that foreign bidders, notably from Canada, were likely to participate in a second auction.

The news comes at a time when Australia seems to be tightening the rules governing the takeover of large agriculture and infrastructure businesses, with approval by the Foreign Investment Review Board now required for any sale of assets deemed strategic.

Controversy had first arisen after the sale of a 99-year lease of Northern Territory’s Port of Darwin to Landbridge Group, with the government criticised by some for allegedly not carrying out full due diligence on the privatisation of a part-military hub to a Chinese entity. In March, Canberra then opposed the sale of S Kidman & Co, Australia’s largest cattle empire, to a Chinese-led consortium.

Ausgrid, New South Wales’ largest electricity distribution business, is the second such asset sold by the state after a group including Canadian pension Caisse de dépôt et placement du Québec, Hastings Funds Management, Australia-listed Spark Infrastructure, Kuwait Investment Authority’s Wren House and a subsidiary of Abu Dhabi Investment Authority bought 100 percent of Transgrid for A$10.3 billion, 1.6 times the company’s regulated asset base.

“Ausgrid’s efficiency will be further enhanced and the business will be aligned with the needs of its 1.7 million customers,” IFM and AustralianSuper said in a statement. “This will result in lower bills to households and businesses by 2019 and a strong, ongoing focus on value-for-money outcomes.”

The Transgrid and Ausgrid transactions have delivered net proceeds of about A$13 billion to the NSW government. The state intends to privatise a third electricity asset, Endeavour Energy.