AustralianSuper rejected as it goes it alone with $5.1bn Infratil offer

NZ-based infrastructure investor Infratil has rejected a $5.1bn takeover by AustralianSuper, saying it undervalues its assets.

Infratil holds positions in renewable energy companies across wind, solar and hydro.

AustralianSuper has lobbed a $5.1bn takeover offer for New Zealand-based infrastructure investor Infratil in a move that signals the next step for the nation’s mega-super funds, with a shift to buying companies outright.

But Infratil has rejected the offer, saying it materially undervalues its assets.

Australia’s largest super fund, with $180bn in assets under management, on Tuesday said it had put forward a proposal to acquire all of dual-listed Infratil’s shares for a total value of $NZ7.43 ($7.04) per share.

The indicative, non-binding offer consists of $NZ5.79 per share in cash and an in-specie distribution of Trustpower shares to Infratil shareholders, meaning Infratil’s current holding in Trustpower, a New Zealand-based power company, would pass to its shareholders.

Alongside the cash component, Infratil shareholders would receive an in specie distribution of 0.2210 Trustpower shares per Infratil share.

Infratil confirmed the offer on Wednesday but rejected it as “materially undervaluing IFT’s high quality and unique portfolio of assets on a control basis”.

Infratil also pointed to conditions related to Foreign Investment Review Board and Overseas Investment Office approvals in Australia and New Zealand “and considers that there are other aspects of the proposal that are unattractive to IFT shareholders”.

“The IFT board will consider any proposal to maximise shareholder value, but given the significant deficiencies in the proposal, no further engagement is planned at this time.”

Despite Infratil’s rejection, some of its largest shareholders are understood to be supportive of the offer, believing it to represent good value.

The bid represents a 28 per cent premium to Infratil’s closing share price of $NZ5.80 last Friday.

Infratil’s shares last traded at $NZ6.08 on the New Zealand stock exchange.

The company is listed on both the Australian and New Zealand stock exchanges and holds substantial stakes in a number of infrastructure assets including Vodafone New Zealand, Wellington International Airport and RetireAustralia.

It also holds positions in renewable energy companies across wind, solar and hydro including Trustpower, Longroad, Galileo Green Energy and Tilt Renewables.

The infrastructure investor on Monday announced that it would undertake a strategic review of its 65.5 per cent shareholding in Tilt, saying it had “recently received a number of enquiries in relation to its shareholding”.

Ahead of the announcement, Infratil’s share price on the ASX rocketed 21 per cent to $6.80 in less than an hour’s trade. The infrastructure manager’s shares were halted shortly after 3.30pm AEDT, around the time AustralianSuper confirmed the bid.

AustralianSuper is believed to have been running the ruler over Infratil for more than a year.

“AustralianSuper believes that the proposal, if implemented, would unlock significant value for Infratil shareholders and seeks engagement with the Infratil board in relation to the proposal,” the super fund said on Tuesday.

The fund was attracted to Infratil’s high quality portfolio of infrastructure assets in New Zealand and Australia, its head of infrastructure, Nik Kemp, said.

“AustralianSuper currently has $NZ1.3bn invested in New Zealand, reflecting our long-term confidence in this market.

“We see significant potential to invest in the growth of Infratil’s assets over the long term on behalf of AustralianSuper’s members, which allows us to provide significant value to Infratil shareholders today,” Mr Kemp said.

“AustralianSuper will continue to seek engagement with the board of Infratil to afford Infratil shareholders the opportunity to assess our proposal in full.”

The Infratil bid is the first time the $180bn super fund has gone out on its own with a takeover offer.

Previously it paired up with private equity funds when pursuing acquisitions, such as Healthscope and Navitas, in a move that sparked debate about the conflict between funds’ listed shareholdings and their moves to take greater ownership of private companies.

AustralianSuper, as part of a consortium, was successful in its $2.1bn bid for education group Navitas, which completed in mid-2019. That was the first time the fund had successfully paired up as part of a consortium with private equity in a major transaction.

It came after an unsuccessful $4.2bn bid for private hospital operator Healthscope, which it also pursued with a consortium led by private equity. Of its $180bn in ­assets under management, AustralianSuper has $20bn invested in infrastructure around the globe.

Its tilt at clean energy infrastructure investor Infratil comes a month after AustralianSuper committed to a net zero 2050 ­carbon emissions target on its investment portfolio, with the fund’s director for ESG and stewardship, Andrew Gray, saying the move would mitigate the risk of climate change on the portfolio’s ­long-term investment performance.

“It is in members’ best interests that AustralianSuper positions the portfolio to a net zero outcome,” Mr Gray said in November.

“This is in line with global market expectations and consistent with our goal of maximising members’ long-term investment returns.”

It has also committed to having $1bn invested in renewables by the end of 2022.