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Hong Kong's CKI launches $9.8 billion bid for Australia's top gas transporter

Reuters  |  MELBOURNE 

By Paul

MELBOURNE (Reuters) - Hong Kong's Infrastructure Holdings has made a A$12.98 billion ($9.8 billion) takeover offer for Australia's biggest company, APA Group, offering a hefty 33 percent premium to tap into a

The deal would make Infrastructure, part of the business empire founded by Hong Kong tycoon Li Ka-shing, the player in Australia's east network. But it comes as soaring gas and power prices have caused political blowback, raising concerns it could run into competition and national security hurdles.

APA's shares rose 21 percent to A$10.00, but closed well below the offer price of A$11 per stapled security, signalling investor uncertainty over whether Australia's (FIRB) and the would clear the deal.

Infrastructure, leading a consortium with and Power Assets Holdings, said it was already talking to the regulators.

Since the controversial sale of the to a Chinese company in 2015, the government has been at pains to demonstrate limits to its ties to China, its biggest export partner, including blocking the sale of Australia's biggest cattle station to Chinese interests.

The FIRB rejected bids by China's and CK Infrastructure for the nation's biggest network in 2016 as that business served an Australian facility.

However, CK Infrastructure ran into no trouble last year with a A$7.4 billion takeover of Australian pipelines and network owner DUET Group, adding to the swathe of gas and power assets it already owns across

CKI's offer for APA A$11 per stapled security was well above APA's last close of A$8.27 and its record high of A$9.90 hit a year ago.

"It's a decent premium. What it basically shows is there is a disconnect between how the private market wants to value these assets and how the stock market values them," said Jason Teh, at Vertium Asset Management, which does not own shares in APA.

APA said on Wednesday it would evaluate the bid and agreed to open its books for the consortium to review. It told shareholders to take no action.

"Based on the indicative price of A$11.00 cash per stapled security, the APA Board considers that it is in the best interests of APA's securityholders to engage further with the consortium," APA said in a statement.

The CKI-led consortium welcomed APA's decision to enter talks, saying the all-cash proposal provided a "compelling opportunity" for security holders to realise value.

APA's biggest shareholder, UniSuper, which owns a 16.1 percent stake, did not comment on the offer price, but chief investment officer, John Pearce, said it fully supported allowing CKI to conduct due diligence.

The competition watchdog said on Wednesday it would take about 12 weeks to review the deal after receiving more information.

APA dominates on Australia's east coast, where the southeastern states are increasingly dependent on supply from in the north, and where CK Infrastructure already owns a

analysts said they doubted any rival bids would emerge but said approval "may be challenging considering APA's dominant position in on the "

Macquarie analysts, however, said plans by other companies to build liquefied might ease concerns about lack of

To avert competition concerns, CK Infrastructure has offered to divest all of APA's pipeline assets in Western Australia, as it already owns the Dampier to Bunbury in that state, acquired in its takeover of DUET.

Macquarie is advising APA, while is advising the CK Infrastructure-led consortium.

($1 = 1.3208 Australian dollars)

(Reporting by Paul; additional reporting by Susan Mathew in BENGALURU; Editing by and Richard Pullin)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, June 13 2018. 14:53 IST