(Adds details on APA's proposal, comment and background) Sept...

(Adds details on APA's proposal, comment and background)

Sept 21 (Reuters) - Australian energy infrastructure firm APA Group (APA) made a non-binding proposal on Tuesday to buy peer AusNet Services Ltd (AST) for A$9.96 billion ($7.22 billion), entering a bidding war with Canadian investor Brookfield Asset Management.

The deal comes as mergers and acquisitions activity in Australia has spiked over the past year, as record-low interest rates encourage institutional investors and companies to chase higher valuations.

The offer came in just a day after an affiliate of Brookfield proposed to acquire AusNet for A$9.57 billion. AusNet opened its books to the affiliate and granted due diligence to it on an exclusive basis.

Under APA's cash-and-stock deal, AusNet shareholders would get A$2.60 per share, representing a 10.2% premium to its last close.

APA said in a statement it had approached AusNet earlier this month with a confidential proposal of A$2.32 apiece, but added that it had also informed the energy infrastructure firm last week of its intention to make a revised proposal.

"APA is disappointed that AusNet has purported to enter into a period of exclusivity with Brookfield for effectively eight weeks, notwithstanding AusNet's knowledge of the pending revised, and potentially superior proposal, from APA," it said.

Shares of AusNet, which owns and operates Victorian electricity transmission network, soared nearly 20% to finish at a record high on Monday following the Brookfield offer.

($1 = 1.3785 Australian dollars)