Gloves off as battle for AusNet heats up
The $10bn battle for Victorian power grid owner AusNet Services has exploded as APA seeks a way back into the bidding contest
Gas pipeline giant APA has sharpened its takeover assault on AusNet Services, telling investors rival Brookfield has no platform to expand AusNet beyond Victoria and its own $10bn deal will allow state governments to tap a ‘‘national champion’’ for renewables.
The spat over control of the Victorian power grid owner escalated on Thursday, with APA lodging a protest with the Takeovers Panel.
It is furious that AusNet handed Brookfield eight weeks of exclusive due diligence for its $2.50 bid despite APA lodging what it regards as a superior $2.60-a-share takeover offer.
APA said it would look to expand AusNet’s electricity business nationally and fast-track its pursuit of opportunities in renewable energy zones.
Its balance sheet could unlock $20bn of electrification investment as states such as NSW and Victoria looked to boost renewable energy zones while coal exited the grid, the company said in a document to be presented to equity sales desks next week.
It says Brookfield has no platform to expand AusNet beyond Victoria and the target would be as a portfolio asset within a global private equity investor. Brookfield’s $2.50-a-share bid would hand shareholders cash but they would have limited comparable exposures to reinvest in, with a market near all-time highs.
However, Brookfield has rejected the claims made by APA and points to the clout of its global business with $US626bn ($862bn) under management and a history of successful deals in Australia including infrastructure group Asciano and Healthscope.
APA’s assertion that Brookfield would face Foreign Investment Review Board concerns was also watered down by the Canadian camp, pointing to its rival’s own likely hurdles gaining ACCC clearance, while it sees pressure around APA’s legacy gas business accelerating due to environment, social and governance risks.
APA’s major shareholder, Unisuper, said AusNet should have granted both companies due diligence and created extra competitive tension between their offers.
“We think they should both be in the tent.
“Eight weeks is a long time to grant exclusive due diligence for electricity transmission. So that is a bit perplexing to start with,” Unisuper chief investment officer John Pearce said.
However, Unisuper is cautious on APA’s plan to carry out a major M&A deal in North America, which has been mulled over for several years but so far has not resulted in any transaction.
“Making an acquisition overseas is always riskier than making an acquisition domestically, regardless of what business or industry you’re in. I don’t think the market would have taken kindly to a major acquisition expanding their gas footprint in the US,” Mr Pearce said.
“We are seeing this whole decarbonisation thematic playing out very strongly and there is the onus on all these companies that have got fossil fuel-related revenues to transition their business.
“So by doubling down in the US with more gas, I don’t think that was going to be well accepted by the market.”
APA’s cash and share bid would allow “mix and match’’ flexibility, with the deal free cashflow accretive in the first full year of ownership, he said.
The gas operator is frustrated AusNet opened its books to Brookfield given it lobbed its first $2.32 a share buyout tilt on September 1, one day after the Canadian’s maiden offer, and then made AusNet aware on September 16 it would return with a higher bid.
Instead AusNet – a major infrastructure player which owns and operates the Victorian electricity transmission network along with gas and power distribution – sided with Brookfield because it had a firm cash offer on the table.
APA’s offer for AusNet is split between $1.82 a share in cash and .0878 APA shares for each AusNet share.
That means the value of APA’s offer will change depending on its share price.
APA’s shares rose 0.8 per cent to $8.66 on Friday while AusNet fell 1 per cent to $2.56.