David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

To lose one utility takeover by a Hong Kong billionaire may be regarded as a misfortune. To lose two looks like protectionism.

That's going to be the problem for Australian Treasurer Scott Morrison in deciding whether to bar Chow Tai Fook Enterprises Ltd.'s bid for electricity and gas utility Alinta Energy Holdings Ltd.

The biggest hurdle with the transaction, which people with knowledge of the matter valued at more than A$4 billion ($3.1 billion), is Morrison's unresolved attitude to foreign investment in Australia's infrastructure -- including a still-outstanding offer for another electricity and gas utility, Duet Group, by Li Ka-shing's Cheung Kong Infrastructure Holdings Ltd.

Both deals need to win the approval of Australia's Foreign Investment Review Board, which makes confidential recommendations to the Treasurer about green-lighting major inward investments. The bigger hurdle is Morrison himself, whose decisions over his 18 months in the role seem swayed more by political expediency than wisdom.

When a Chinese consortium sought to buy control of S. Kidman & Co., a cattle business whose ranches cover an area larger than South Korea, Morrison used the fig leaf that a review of the takeover found "significant domestic interest in Kidman" to block the deal on national interest grounds -- which isn't quite the same thing.

When CK Infrastructure and China's State Grid Corp. bid for Ausgrid, a government-owned electricity distributor in the Sydney region last year, Morrison again cited vaguely defined "national interest concerns". Two months later, the utility was sold to local funds for about 20 percent less than the foreigners had been offering.

Australian utility assets look attractive to Hong Kong's tycoons. The richest dynasties, including the Li family and the Chow Tai Fook empire run by Henry Cheng, made the bulk of their money from real estate. But mainland firms have been buying up land and now control more of the local property market. Chow Tai Fook's jewelry business has also been hit as sales in Hong Kong suffer from a slump in Chinese tourists.

A generational shift is also taking place, which is driving a fresh search for returns. Cheng has been gradually handing control of Chow Tai Fook to his son Adrian, while the 88-year-old Li is looking to transition much of his Cheung Kong empire to eldest son Victor.

Henry Cheng, whose family controls Chow Tai Fook Enterprises, is Hong Kong's third-richest person
Source: Bloomberg Billionaires Index

In that context, the model perfected by Li -- buying up infrastructure in rich, developed markets out of reach of the long arm of Beijing -- could hold attractions for many of his Hong Kong contemporaries.

With foreign money knocking at Australia's door, Morrison's policy on all this is in a pickle. His government came to power in 2013 promising "asset recycling," selling off state-owned infrastructure and using the proceeds to build more. Australia's trade bureaucrats have spent several years touting the attractions of the country's assets to foreigners.

Sydney's main port is part-owned by the Abu Dhabi Investment Authority, and Canadian pension fund La Caisse de Depot & Placement de Quebec has a stake in Brisbane's port.  CK Infrastructure already owns a swath of gas and electricity distribution networks in the states of South Australia and Victoria, and even State Grid has an indirect minority interest in Duet's United Energy electricity network. The main player in the consortium that currently controls Alinta is TPG Capital LP, based in Fort Worth, Texas.

That history of offshore investment augurs well for both the deals awaiting approval. It's conceivable that Li's Duet bid may have been blocked simply because it's so similar to the Ausgrid offer. Refusing CKI on Ausgrid while waving it through on Duet would look so flagrantly inconsistent it would leave Morrison with egg on his face.

Dry Spell
Foreign direct investment inflows into Australia have fallen to their lowest levels in at least a decade
Source: UNCTAD
Note: The negative figure in 2005 was largely due to the reincorporation of News Corp. in the U.S.

That petty consideration might have been enough to halt one offer, but by throwing Alinta into the mix, the Chengs have raised the stakes. To stymie three offshore utility takeovers in the space of a year would look like outright protectionism -- a risky proposition given the way foreign direct investment fell to a decade-low in 2015.

If Australia wanted to block overseas infrastructure investment, the horse on that particular counter-productive policy has long bolted. The Cheng family looks to have done Li Ka-shing a big favor.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the authors of this story:
David Fickling in Sydney at
Nisha Gopalan in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at