The nation’s largest gas pipeline owner, APA Group, is sending strong signals into the market that it plans to retreat in the battle for $10bn electricity asset owner AusNet.
DataRoom understands that the message being sent around the market to APA’s investors is that Brookfield’s offer (sweetened to $10.2bn, from $9.6bn), the $101m break fee in place and the fact that 32.3 per cent shareholder Singapore Power is backing the cash bid from the Canadian-based private equity firm are major challenges to navigate.
The intentions of China’s State Grid, which owns just over 19 per cent of AusNet, are still uncertain.
It is understood that APA’s deal team is now focused on the chance that the Foreign Investment Review Board will reject Brookfield’s offer on the grounds of public interest.
However, after making its initial $2.50-a-share cash offer, Brookfield now has Queensland-based superannuation fund Sunsuper as a co-investor, owning about 20 per cent.
Meanwhile, APA’s largest shareholder with a 14.2 per cent stake, UniSuper, reportedly has concerns about the listed group entering a bidding war with Brookfield and is instead keen on APA embarking on a share purchase.
This was after initially supporting the bid by APA.
Shares rallied on the news this week that Brookfield had lifted its bid for AusNet, with the sentiment among some shareholders that APA missing out on AusNet was good news.
Investors have concerns about a major equity raising and excessive debt being taken on by the company, which has also been a target of short sellers.
On Monday, AusNet announced Brookfield and four other consortium members had put forward a cash bid of $2.65 a share.
While Brookfield has plenty of opportunities globally where it can allocate capital and is disciplined on price, AusNet has been seen as a must-have for APA, which needs to diversity away from gas and into electricity to protect its prospects with the investment drive towards clean energy. However, its management is not thought to want to break its track record on remaining disciplined when it comes to price.
APA had just started carrying out due diligence on the target and, while that access has now been terminated, sources say it would have had enough time to be informed with a new proposal. APA had earlier offered $1.82 cash and 0.0878 APA shares for every AusNet share, currently valuing its offer at $2.59.
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