AusNet backs $10.2bn takeover offer from Brookfield
AusNet is set to fall under Canadian control after it agreed to a $10.2bn takeover offer from a consortium led by Brookfield.
Victorian power grid owner AusNet Services is set to fall under Canadian control after it agreed to a $10.2bn takeover offer from a consortium led by Brookfield, ousting rival APA Group from the bid battle.
Brookfield’s fourth bid, an all-cash offer of $2.65 a share, saw APA booted out of the due diligence process after a tit-for-tat battle between the suitors both attracted by the long-term returns on offer, with AusNet’s electricity infrastructure seen vital to hit net zero emission goals.
The consortium -- including several Canadian institutions and Australian fund Sunsuper -- already has the support of Singapore Power, which owns 32.7 per cent of AusNet. Brookfield is confident major investor China’s State Grid will also accept its takeover deal.
“State Grid is on the AusNet board and it’s important to note that the board did vote unanimously in favour of the transaction,” said Stewart Upson, Asia Pacific chief executive at Brookfield Asset Management.
“That does not bind State Grid as a shareholder but it’s positive we think that they obviously want the deal to come forward to shareholders for a vote.”
For State Grid, which owns 19.9 per cent of AusNet, taking the cash on offer in Brookfield’s buyout tilt would make for a clean exit and a hefty payday nearly eight years after it first acquired its stake.
Singapore Power first indicated its interest in selling, which Brookfield said effectively kicked off the auction process, although that also means State Grid may be more “reactive” in the current bid situation.
“This all started because there was some interest from Singapore Power on a potential exit. And they were open to the idea and that’s what gave it the legs. State Grid is, I think, more reactive to it and as a result they are going to wait and see how it plays out. And then make their decision based on what they think is best for them,” Mr Upson told The Australian.
Still, blocking its bid could dampen any future M&A raids on AusNet, Brookfield predicts.
“This is obviously a full price that is very attractive for shareholders. And you would expect though if it was to fail at a shareholder vote, especially because a large shareholder blocked it, it’s pretty unlikely you’re going to see a transaction like this for the company again anytime in the near future,” Mr Upson said.
“So if shareholders including State Grant had any interest in exiting it on such an attractive basis, they need to do it now if they want to do it.”
Brookfield’s bid represents a 34 per cent premium to the AusNet share price of $1.98 as at September 17 and has been unanimously recommended by AusNet’s board in the absence of a superior proposal. It tops APA’s $2.60 offer, which was a combination of cash and scrip, and the Australian company best known for its extensive gas pipeline network hinted it may bow out of the race.
“APA still considers the AusNet business to be highly attractive,” APA told the ASX. “While APA has received strong support from investors in both AusNet and APA Group for its proposed acquisition, APA will continue to remain financially disciplined.”
Brookfield and APA have been locked in a war of words over the takeover deal after AusNet granted due diligence to the Canadian suitor and only opened its books to APA after a Takeovers Panel ruling.
The Canadian asset manager is attracted to the growth prospects of AusNet’s more than $11bn regulated and contracted asset base, as the energy transition accelerates.
Brookfield has recently been active elsewhere in Australia, joining the bidding war for airline Virgin Australia last year, while its majority-owned subsidiary Oaktree Capital offered to fund a buy out of billionaire James Packer’s stake in casino giant Crown Resorts earlier this year.
Brookfield said it was confident of receiving approval from the Foreign Investment Review Board given its extensive track record in Australia.
“This is our seventh large scale take private transaction in Australia. Obviously there is a high degree of familiarity between FIRB and ourselves,” Mr Upson said.
AusNet shares rose 3.6 per cent to $2.56 on Monday while APA lifted 2.6 per cent to $8.41.