APA fails to force AusNet to table with $10 billion takeover bid

© Paul Rovere NEWS/BUSINESS April 8, 2021. Electrical linesmen work on Powercor power lines in Kyneton from a cherry picker. CitiPower and Powercor are two of Australia’s largest electricity distribution networks supplying power to over 1.1 million Victorian households. Photo by Paul Rovere Generic Powercor, powerlines, power lines , electricity, electric, workers, electrician, overhead, blackout, outage, repair, cherrypicker, stock photo

Gas pipeline giant APA Group has failed to force its way into takeover talks with AusNet Services despite lobbing a $9.96 billion bid for the group with a promise of preventing Victoria’s power grid becoming fully foreign owned.

The ASX-listed AusNet said APA would have to wait at least eight weeks to look at its books while rival bidder Brookfield completes a period of exclusive due diligence granted on Monday, to flesh out its $2.50 cash per share ($9.6 billion) offer.

APA said on Tuesday it was “disappointed” AusNet gave the Canadian infrastructure giant exclusive due diligence given the pair had been discussing a potentially better deal. APA revealed a cash-and-scrip offer worth $2.60 per share but said it would walk away unless it was let inside AusNet’s data room by next Tuesday.

AusNet – which owns and operates Victoria’s electricity network – did not budge and defended granting Brookfield exclusivity, saying it was a key condition of the suitor increasing its offer from $2.35 in August to $2.45 and then $2.50.

AusNet added that APA’s first approach on September 1 was $2.32 per share, and was “inferior in respect of price, form of consideration, structure and certainty” to the Brookfield offer.

“AusNet will consider the APA [proposal] and has the ability to engage with APA following completion of the exclusivity period,” the company said on Tuesday afternoon.

AusNet shares closed almost 10 per cent higher at $2.59, after climbing 19 per cent on Monday.

The bidding battle comes amid a surge in interest in infrastructure privatisation deals. Poles and wires outfit Spark Infrastructure accepted a $5.2 billion takeover from a consortium led by US private equity firm KKR last month, while Sydney Airport is negotiating a $23.5 billion sale to a group led by the super fund-backed IFM Investors.

APA said that its revised offer was not only superior value but also delivered certainty because unlike Brookfield it did not need Foreign Investment Review Board approval.

A Brookfield takeover of AusNet would mean 100 per cent of Victoria’s electricity distribution and transmission infrastructure would be foreign owned. UBS analyst Tom Allen said on Tuesday that FIRB may apply a “very high bar” to approve a takeover from a national security perspective.

AusNet is 32 per cent owned by Singapore’s state investment arm Temasek and 19.9 per cent owned by the Chinese government’ State Grid Corporation.

APA chief executive Rob Wheals said that unlike many developed nations, Australia did not have a “locally owned and controlled energy utility with capabilities across critical energy infrastructure and with the size and strength to partner with government and the community to deliver the energy transition.”

“The combination of APA and AusNet is a unique opportunity to deliver that vision and retain a proudly Australian controlled combined group listed on the ASX,” he said.

APA said AusNet shareholders could also remain invested in a listed company that would deliver synergy benefits from merging the two groups to create Australia’s largest energy transmission and distribution utility.

APA said it would need to raise about $1.5 billion in new equity to fund the deal if accepted. The stock fell 4.8 per cent after the announcement, to $8.46.

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