Gas pipeline owner Hastings Diversified Utilities Fund (HDF) says it is already a profitable company that does not need rival APA Group and has rejected what it calls an opportunistic bid.
APA Group, Australia’s largest gas pipeline owner, already owns 20.7 per cent of HDF and has offered 50 cents and 0.326 of its own securities for each remaining HDF security in a hostile bid.
HDF chief executive Colin Atkins told AAP that the bid had been timed to when HDF was on the verge of securing two lucrative contracts. They were a $460 million deal with Santos and the expansion of the South Queensland Pipeline.
APA Group owns or operates 12,800 kilometres of natural gas pipelines across Australia, which could be connected HDF’s strategic pipelines all over Australia with proximity to the Cooper and Carnarvon Basins.
“Those subsequent announcements had a positive stock impact and further dilute the already low premium proposed,” Mr Atkins told AAP.
The original APA offer implied a value of $2 per HDF share and an enterprise value of about $1.8 billion.
APA has since conceded, in a supplementary statement, it values the per security bid at $1.92 adjusting for interim dividends.
HDF argues the offer undervalues it, and was heavily conditional with numerous escape clauses for APA and did not recognise HDF’s higher stock returns and sharp revenue growth it would achieve as demand for gas shot up.
The company says it’s still open to a higher bid and has urged securityholders to reject the current offer.
“We’ve already contracted revenue growth, we know it’s coming,” Mr Atkins said.
“Beyond that, we know what’s going on in energy markets.
“We see the prospectivity of gas playing an increasing role both domestically and internationally, all of which leads to our main pipes connecting main gas reserves with where they need to go.”
APA Group hit back on Friday, saying it was extraordinary that HDF had not included an independent expert’s report on the value of HDF in their statement.
“We can only assume no independent expert’s report has been provided because HDF feared the report would confirm APA’s offer was within the value range,” APA managing director Mick McCormack said.
“APA’s offer provides HDF securityholders with an opportunity to become an investor in a significantly larger entity offering the benefits of scale and diversity, while retaining exposure to the HDF assets.”
APA also says too much of HDF’s profit is leaked to external managers, recently revealing a $30.7 million cash performance fee to Westpac Hastings Funds Management.
Hastings closed up 0.5 per cent, or one cent, at $2, while APA ended down eight cents, or 1.74 per cent, at $4.53.
