Some fund managers are calling the top of the market after three of the nation’s top listed infrastructure stocks have recommended buyouts collectively worth more than $38bn since August.
Brookfield’s $9.6bn buyout proposal for electricity asset owner AusNet announced on Monday comes after Sydney Airport signalled it would agree to be privatised by an IFM-led consortium in a $23.6bn deal and KKR, Ontario Teachers Pension Plan and PSP are in the process of swallowing another electricity asset owner, Spark Infrastructure, after that deal received board room support.
It leaves only toll-road owner Transurban, which is considered too big to privatise, and listed gas pipeline owner APA Group – itself on the hunt for acquisitions – as the only major infrastructure investment opportunities left on the listed market.
Some believe that the situation bodes well for attempts for a float on the Australian Securities Exchange for US-based SG Lottery.
The group, which generates money from offering services to lottery providers, predominantly in Europe and the US, is passing itself off as an infrastructure play as it seeks to raise about $5bn to list on the Australian Securities Exchange, despite having no strong connection to the local market.
On AusNet, the big unanswered question is whether its 32.3 per cent owner Singapore Power and 19.9 per cent owner State Grid of China will support a proposal.
Both shareholders are government-owned and one view is that Singapore does not need the money and is not a seller, while China is a wildcard and may move to frustrate a deal.
Another question is whether the increasingly hardline Foreign Investment Review Board would support an offer, although most believe it would be low-risk.
Canadian private equity firm Brookfield has tapped Barrenjoey Capital Partners for its $9.6bn acquisition proposal, while Citi, Adara Partners and law firm Allens are working for AusNet.
Brookfield has been granted exclusive due diligence to potentially buy the Victoria electricity transmission network owner for $2.50 a share after it had earlier been trading at about $1.98 a share, or $7.6bn.
Other groups have circled AusNet, but have not bid due to the dominant position held by State Grid and Singapore Power, and one possibility is that APA – under pressure to grow – looked at the business earlier on. However, most believe it would be unable to compete with Brookfield on price.
Brookfield first bid $2.35 a share for the business on August 30 and later $2.45 a share – a 26 per cent premium to AusNet’s closing price on September 17 of $1.98. Should Brookfield make an offer of $2.50 a share after due diligence, the board intends to recommend the proposal.
The company has a regulated and contracted asset base worth more than $11bn and the drawcard for the buyer is that the assets are 100 per cent-owned.
The offer is 1.68 times the group’s regulated asset base of more than $11bn.
Spark Infrastructure was purchased for 1.51 times the company’s RAB.
However, Spark only owned minority interests of electricity transmission and distribution assets in NSW, South Australia and Victoria.
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