Independent directors of Hastings Diversified Utilities Fund’s (HDF) responsible entity will meet to discuss a fresh takeover offer from APA Group as investors ponder whether there will be a new bid from a competing suitor.
Gas distributor APA on Wednesday sweetened its hostile takeover bid for energy infrastructure investor HDF, saying the offer would provide value of at least $2.525 per HDF stapled security.
At $2.525 per security, the new APA bid is worth $1.34 billion.
HDF securities were six cents higher at $2.54 on Wednesday.
The new APA bid is higher than APA’s original offer of $2.13, which was rejected by HDF’s responsible entity, Hastings Funds Management Ltd (HFML).
The new APA bid is also at a premium to a competing bid of $2.325 per security bid from Pipeline Partners Australia (PPA).
HFML had recommended that securityholders accept the Pipeline Partners bid in the absence of a superior offer.
Pipeline Partners is a consortium which includes Caisse de depot et placement du Quebec (CDPQ) and the Hastings-managed Utilities Trust of Australia (UTA).
HFML said a subcommittee of independent directors would consider APA’s latest offer.
“A subcommittee of independent directors of HFML will meet to consider the terms of the announcement and will keep the market informed of any developments as appropriate,” HFML said in a statement on Wednesday.
APA’s new offer includes a cash component of at least 60 cents, with the rest made up of a fixed amount of APA securities.
“Together with the distribution from HDF of $0.025 per stapled security, due to be paid in early August, this represents a combined value of at least $2.525 per stapled security,” APA said.
APA had been expected to make a fresh bid for Hastings after the competition watchdog last week cleared its takeover push on the condition that APA sells HDF’s Moomba-to-Adelaide Pipeline System (MAPS).
APA managing director Mick McCormack said that in order to formalise its revised offer, APA sought from Hastings a short period of due diligence.
Morningstar analyst Adrian Atkins said it was possible that Pipeline Partners may come back with a fresh bid of its own, but he thought it unlikely.
“This could be it. There’s two different bids: one is cash and one is cash and scrip,” he said.
“It’s up to Hastings directors to decide which way they’re going to land, but you could see them going for the lower cash bid from that related entity.
“Scrip is less certainty, which they might pick up on as one reason to recommend against the higher bid.”
Mr Atkins said the next step in the process would be for Hastings to facilitate the due diligence process for APA.
Mr Atkins described the new APA offer as a good bid because it was of a high value and a merged entity of APA and HDF would have an impressive array of assets.
Pipeline Partners Australia on Wednesday continued to promote its bid.
“APA’s potential offer is primarily comprised of an undefined number of APA securities with uncertain value for HDF securityholders compared with the certain value of PPA’s all-cash offer,” a PPA spokesperson said.
“In addition, the uncertainty associated with the execution of the court-enforceable sale of MAPS is a material value risk to both HDF and APA securityholders.”
