APA Group is expected to make a fresh bid for energy infrastructure investor Hastings Diversified Utilities Fund (HDF), despite the takeover target rejecting its advances.
HDF’s responsible entity, Hastings Funds Management Ltd (HFML), on Friday noted the Australian Competition and Consumer Commission’s (ACCC) decision not to oppose APA’s proposed takeover of HDF on the condition that APA sells HDF’s Moomba-to-Adelaide Pipeline System (MAPS).
But HFML said APA’s offer was still conditional upon 90 per cent acceptance of the offer by HDF securityholders, change of control of financing arrangements and other regulatory approvals.
“A subcommittee of independent directors of HFML continues to unanimously recommend that HDF securityholders reject APA’s offer,” HFML said in a statement.
APA, which is Australia’s biggest natural gas infrastructure operator, is competing with Pipeline Partners Australia to take over HDF.
Hastings’ board last Friday recommended that its investors accept a $1.23 billion takeover offer from Pipeline Partners.
While Pipeline’s $2.325-a-security offer trumped the $2.13 offered by APA, the latter is now free to increase its cash-and-scrip offer, after winning over the ACCC on Thursday.
“APA is cleared to make a higher offer, which we think is highly likely,” Morningstar analyst Adrian Atkins said in a research note.
“APA is mostly offering scrip, making it more difficult to compare to the $2.325 cash offer from the Pipeline Partners Australia consortium, which includes another Hastings trust.
“This makes it easier for HDF directors to justify rejecting APA’s bid even if it’s higher than the cash offer.”
Mr Atkins said that if APA could offer a competitive takeover price and capital gains tax rollover relief, it would be very attractive to HDF investors.
After winning ACCC approval on Thursday, APA extended the amount of time HDF’s securityholders have to accept its offer from its original July 31 deadline.
APA managing director Mick McCormack said that the ACCC’s decision enabled APA to consider its options in relation to the bid for HDF.
The ACCC had been concerned that if HDF were owned by APA, APA would own all of the gas pipelines servicing Moomba in South Australia and have a significant interest in both of the pipelines servicing Adelaide, with competition suffering as a result.
But should its bid succeed, APA has agreed to sell HDF’s Moomba-to-Adelaide pipeline to alleviate the ACCC’s concerns.
Meanwhile, the Takeovers Panel has received an application from the Australian Foundation Investment Company (AFIC), which is a unitholder in HDF.
AFIC is seeking orders from the Takeovers Panel that HFML obtain an independent valuation of the internalisation of management of HDF in the context of a takeover bid.
Securities in HDF were 14.5 cents, or 6.17 per cent, higher at $2.495 at 1408 AEST on Friday while APA was 16 cents lower at $4.92.
