Australian Investment Blog

ASX:APA 13/06/2018

APA jumps on Hong Kong Interest

Stock

APA Group (APA) $10.00 as at 13/06/2018

Event

Hong Kong firm Cheung Kong Infrastructure – CKI – has lobbed a sizeable offer at gas infrastructure business APA at $11/share. The bid represented a 33% premium to yesterday’s close price as the Asian infrastructure giant seeks to get a larger handle in the Australian energy market. The deal has two hurdles to get through – first is the APA board and shareholders (likely satisfied with the initial bid as the board was quick to grant due diligence to the suitors in light of the premium being offered), and secondly it will need the Foreign Investment Review Board’s (FIRB) approval, a much harder process. APA Group Chart

Market Matters Take/Outlook

APA’s assets are critical to Australia’s much discussed energy market and FIRB is likely to want a number of conditions and guarantees met if it is to approve the bid at all. CKI has a history with acquisitions in Australia – some good and some bad. The bad being a failed attempt at Ausgrid back in 2006 when Scott Morrison turned the $11b deal down. The good being the successful acquisition of DUET group which FIRB approved back in August last year – its unsure whether this deal will now help CKI, drawing on the experience in dealing with FIRB, or if the acquisition of APA would potentially grant CKI too much ‘power.’ The market is clearly pricing in the risk of the deal falling over, APA closed at $10 today, 9% below the bid of $11.

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