Li Ka-Shing Bid Values Australia’s Envestra at A$2.4 BillionJames Paton
Billionaire Li Ka-shing’s Cheung Kong Group joined the battle for Envestra Ltd. with a cash bid that values the Australian natural gas distributor at A$2.4 billion ($2.3 billion).
A group including Cheung Kong Infrastructure Holdings Ltd., the second-largest holder in Envestra, offered A$1.32 a share, the Adelaide-based company said today in a statement. That compares with the APA Group stock offer worth A$1.31 a share as of the close. APA is Envestra’s biggest holder with 33 percent, according to data compiled by Bloomberg.
At stake is Envestra’s 23,000 kilometers (14,000 miles) of pipelines that supply gas to customers, mostly in the states of Victoria and South Australia. It comes after Li almost doubled the size of his U.K. gas transmission business in 2012 with the 645 million pound ($1.1 billion) purchase of Wales & West Utilities Ltd. APA added to its networks in Australia with the purchase of Hastings Diversified Utilities Fund in 2012.
Cheung Kong “may have wanted a continued investment in a regulated gas distribution company to give them a strategic position in the Australian market and the certainty of earnings Envestra provides,” Nathan Lead, a Brisbane-based analyst at RBS Morgans Ltd., said today by phone. “If it’s taken out by APA they lose that exposure.”
CKI’s representatives on the Envestra board, Dominic Chan and Ivan Chan, had recommended in March that holders vote against APA’s offer because it isn’t in their interests. CKI holds 17.5 percent of Envestra. APA Group’s pipelines deliver more than half of Australia’s natural gas.
The bid depends on approval from Australia’s Foreign Investment Review Board, among other conditions, Envestra said. Goldman Sachs Group Inc. is advising Envestra, according to the statement.
Cheung Kong “is offering up cash, and that’s the key difference that will probably prove attractive to investors who may not want exposure to APA’s share price,” Lead said.
Envestra, which has been suspended since May 7, last traded at A$1.13 a share.
APA reached a deal with Envestra in December to buy the rest of the company after raising an earlier offer. Under the deal that was scheduled to go to a vote this month, shareholders have the option of receiving either 0.1919 APA shares for each Envestra share, or a combination of stock and cash, APA said in December.
Envestra will seek court approval to put off the meeting previously scheduled for May 13, it said.
CKI, Cheung Kong (Holdings) Ltd. and Power Assets Holdings Ltd., the three Cheung Kong Group companies forming the consortium, will each carry one-third of the bid, CKI spokeswoman Wendy Tong Barnes said in a statement faxed from Hong Kong. David Symons, a spokesman for APA in Sydney, declined to comment.
CKI, the Hong Kong-based company controlled by Asia’s richest man, owns power and water networks in the U.K. and Australia. As part of a consortium, CKI bought the U.K.’s Northumbrian Water Group in 2011.