APA Group, whose pipelines deliver more than half of Australia’s natural gas, agreed to buy the rest of distribution company Envestra Ltd. (ENV) after raising its bid to about A$1.4 billion ($1.3 billion).
APA will pay the equivalent of A$1.17 a share, depending on Envestra shareholder approval, the Sydney-based company said today in a statement. That’s 9 percent more than Adelaide-based Envestra’s close yesterday of A$1.07, which is the equivalent price of the initial July bid.
Buying Envestra, whose shareholders include Li Ka-Shing, Asia’s richest man, will give APA control of 23,000 kilometers (14,000 miles) of pipelines that supply gas to customers, mostly in the states of Victoria and South Australia. APA, which owns 33 percent of Envestra and operates its networks and pipelines, last year bought Hastings Diversified Utilities Fund.
“It’s a reasonable, but not stretched, offer price,” Nathan Lead, a Brisbane-based analyst at Morgans Ltd., said today in an e-mail, adding that it’s unlikely another bidder will emerge. For APA, the acquisition “significantly improves” the company’s operating cash flow per share, he said.
Envestra gained 4.7 percent to A$1.12 in Sydney, and APA shares fell 3.6 percent to A$6.13, the most in five months, while the S&P/ASX 200 Index rose 0.3 percent.
In August, Envestra rejected APA’s initial offer, saying it undervalued its shares. An independent board committee will put the revised bid to shareholders and name an outside expert to assess the price, Envestra said in a separate statement.
Envestra shareholders will have the option to receive either 0.1919 APA shares for each of their shares, or a combination of stock and cash, APA said today. Envestra investors also will be able to get a dividend of about 3 cents per share the company expects to pay in April.
APA’s initial bid was valued at A$1.10 a share, the company said July 16. This valuation included the 3 cent dividend.
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