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APA Makes A$1.3 Billion Bid for Envestra to Add Gas Networks

APA Group, whose pipelines deliver more than half of Australia’s natural gas, offered to buy the rest of Envestra Ltd. (ENV) for about A$1.3 billion ($1.2 billion) to gain one of the country’s largest gas distribution companies.

APA offered the equivalent of A$1.10 for each Envestra share, the Sydney-based company said today in a statement, 3.8 percent more than the close yesterday. APA already owns 33 percent of Envestra and operates the company’s gas distribution networks and pipelines, according to the statement.

APA, which has a pipeline network spanning more than 14,000 kilometers (8,700 miles), would add a company with 1.2 million gas consumers in South Australia, Victoria, Queensland and New South Wales states. Envestra, partly-owned by Li Ka-Shing, Asia’s richest man, owns 1,120 kilometers of gas pipelines and 22,500 kilometers of gas distribution networks.

“Existing shareholders may seek to extract a higher takeover premium, as well as a cash component to the offer price,” Nathan Lead, a Brisbane-based analyst at RBS Morgans Ltd., said in a note today. “However given APA’s existing stake in Envestra is 33 percent, at this stage it is difficult to believe that a competing proposal will emerge.”

Shares of Envestra rose 6.1 percent to A$1.125, the highest in almost six years, at the close in Sydney. APA fell 2.4 percent to A$6.23.

Non-Binding Offer

The bid, which isn’t binding, values Adelaide-based Envestra at about A$1.98 billion and would create a combined company with a market value of about A$6.6 billion, APA said. The offer follows APA’s acquisition last year of infrastructure company Hastings Diversified Utilities Fund.

Envestra hired Goldman Sachs Group Inc. as an adviser and will form an independent committee to consider the proposal, the company said today in a separate statement. Rothschild is advising APA.

Shareholders of Envestra would receive 0.1678 new APA shares for each share they own and would be entitled to any final Envestra dividend for the 2013 fiscal year of as much as 3 cents a share, according to the statement.

Envestra’s second-largest shareholder is Li Ka-Shing’s Cheung Kong Infrastructure Holdings Ltd. (1038), which has a 17 percent stake, according to data compiled by Bloomberg.

The bid is “fair and reasonable,” APA Managing Director Mick McCormack said today on a call with analysts. “We would hope CKI sees the value that’s inherent in this proposal.”

A message left with the corporate affairs department at Cheung Kong Infrastructure in Hong Kong wasn’t returned.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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