Investors in the $14bn APA are bracing themselves for a $1bn equity raising by the company as the gas pipeline owner closes in on a $2bn acquisition target in the US.
Sources say APA has been working on a deal to buy an asset in the US for up to seven months and an announcement may not be far away.
There are suggestions that the company, under the control of new chief executive Rob Wheals, is planning to outlay $2bn on a US-based gas interconnector asset and will fund the transaction through a $1bn equity raising. The remainder will be paid for with debt.
APA has declined to comment. However, it is understood Mr Wheals has briefed parties in the market about the likely deal and on the funding plans.
APA is known to have been keen to buy a major asset in the US for some time.
In 2016, it indicated it was planning to spend up to $4bn for a US gas infrastructure business but was yet to land a target.
LNG prices have collapsed in the US due to oversupply, which some suggest could be the reason why an acquisition has taken so long to eventuate.
APA had been working with JPMorgan to secure a target, but it remains unclear whether the US-based investment bank remains on the ticket. At least one other bank such as Macquarie could also be recruited if a major capital raising emerges.
In the second half of last year, APA indicated it was stepping up its focus on a US acquisition as looming regulatory reforms restrict growth opportunities for its Australian business.
The latest discussion comes after APA’s head of strategy, Ross Gersbach, recently moved to the company’s Houston office.
A plan for a deal was placed on ice for the short term in 2018, when Hong Kong’s CK Infrastructure made a $13bn takeover bid for the company.
While APA recommended the deal, Josh Frydenberg blocked the transaction on the grounds of national interest.
After the deal failed, IFM Investors was understood to have hired investment bank UBS as part of an attempt to pull together an Australian-based consortium to make another takeover for the group.
However, the understanding is that few parties could afford to offer the $11 a share being put forward by CKI and the chances of a lower bid being accepted by the board was seen as unlikely.
Shares in the company then rallied, which was thought to put a bid out of the grasp of an IFM-led consortium.
Parties looking to be part of a rival bid were understood to be GIP, advised by Credit Suisse, and Canada’s OMERS.
APA delivered an 8.8 per cent lift in annual net profit to $288m in August, which was at the top end of its guidance.
Shares in APA closed 9c higher at $11.71.
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