APA looking for a US acquisition after CK takeover was blocked
APA is considering a US gas business buy as it looks to rekindle expansion plans after the blocking of CK’s $13bn takeover.
APA Group is considering buying a US gas infrastructure business as it looks to rekindle an international expansion, after CK Group’s $13 billion takeover bid for the pipeline operator was blocked by the Australian government.
The Sydney-based company says it is conducting ongoing due diligence of the North American gas infrastructure sector with a focus on acquiring a business with a similar or lower business risk profile as APA itself.
APA opened an office in Houston some 18 months ago but progress in striking a deal was delayed as the CK takeover process dragged on in the first half of 2019.
It cited favourable gas fundamentals, attractive rates of return and the significant number of entry points available into the US market.
However, Macquarie said the mooted move into North America divides opinion among shareholders.
The North America focus “remans polarising for investors and ultimately creates some uncertainty until the initial investment and track record is obtained. The focus is the risk profile of the US assets is slightly different,” Macquarie said in a note to clients. “We expect caution will remain around the US strategy with more colour required before investor confidence will emerge.”
APA said it expects full-year earnings at the upper end of guidance of $1.55bn to $1.575bn after posting a 27 per cent rise in net profit for the first half.
Net profit rose to $157.4 million from $120.4m in the same period of 2018 while earnings before interest, tax, depreciation and amortisation rose 4.3 per cent to $787.7m from $755.3m.
“There is an implied EBITDA upgrade as it includes the CKI expenses and now is at the top end of the range. However this was expected, thus is unlikely to have a material impact on the share price,” Macquarie said.
APA shares rose 0.85 per cent to $9.48 in early trade. The company’s shares have increased nearly 12 per cent so far this year partly due to the fall in bond rates, according to Macquarie.
APA’s chief executive Mick McCormack in December flagged his intention to retire just three weeks after Treasurer Josh Frydenberg rejected the takeover of APA by Hong Kong’s CK, citing national interest concerns.
Mr McCormack will retire no later than the end of 2019, although no update on his successor was provided today.