From The Australian this morning. Li sparks Envestra bidding...

From The Australian this morning.
Li sparks Envestra bidding battle

Damon Kitney |
The Australian |
May 09, 2014 12:00A
THE Hong Kong conglomerate controlled by Asia’s richest man, Li Ka-shing, may have sparked a bidding war for Adelaide-based gas distributor Envestra after lodging a $2.4 billion counteroffer to a takeover proposal by APA Group.

Cheung Kong Infrastructure (CKI), which holds a 17.5 per cent stake in Envestra, on Wednesday evening lodged an indicative, non-binding and conditional all-cash bid of $1.32 per share for Envestra, at the top of the range assessed by an independent expert for the APA bid.

Envestra shares went into a trading halt yesterday while a committee of independent directors assessed the rival bid, which will put pressure on APA to alter its cash and scrip bid, initially valued at $1.17 per share.

If APA opts out of a bidding war and sells its shares to CKI it will generate a profit of about $350m on its investment.

Under chief executive Mick McCormack, the company has made a string of acquisitions.

The rise in the APA share price since its bid was first unveiled means its offer is now worth about the same as the CKI offer.

The independent expert, Grant Samuel, valued Envestra at between $1.11 and $1.32 per share.

APA owns 33 per cent of Envestra and has management rights to the majority of Envestra’s assets.

Those arrangements will not change if CKI is successful in its bid.

Envestra last night urged its shareholders to take no action, while APA declined to comment.

The move by CKI highlights the ongoing interest from international players in Australian utility assets and comes after the Hong Kong conglomerate was outbid last year by investment manager QIC in the race to buy the Moomba to Adelaide Pipeline System.

CKI was also an underbidder for the Port of Newcastle, which was sold last week to a consortium including Hastings Funds Management and the Chinese state-owned enterprise China Merchant’s Group.

Last year CKI paid $US420 million for New Zealand’s second-biggest waste operator, EnviroWaste.

CKI’s move comes just days before Envestra shareholders were due to vote on APA’s $2.1 billion scrip takeover offer, which was being opposed by the CKI-nominee directors on the Envestra board.

The directors Dominic and Ivan Chan had claimed APA had a different risk and financial profile to Envestra, wanted more cash in the bid and argued the premium for control being offered by APA Group was insufficient.

However, the CKI proposal is conditional on due diligence, Foreign Investment Review Board approval and 50 per cent minimum acceptance.

CKI is also seeking a binding confirmation from the required number of Envestra financiers to waive a clause making all of the company’s debt immediately repayable in the event of a change of control.

A third of Envestra’s financiers need to agree for the clause to be waived, which they did for APA’s bid.

APA shares rallied yesterday, adding as much as 2.7 per cent in early trading before easing to close 6c, or just under 1 per cent, higher at $6.84. Envestra shares closed on Wednesday at $1.13.

CKI does not expect the ACCC to oppose the offer.

Envestra owns 23,000km of gas distribution networks and more than 1000km of long-distance transmission pipelines across eastern Australia.





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