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Why the Ausnet (ASX:AST) share price is charging higher

The Ausnet Services Ltd (ASX: AST) share price is going bananas and is up over 18% after it received a takeover offer.

Ausnet is an Australian energy company with a network of power lines, electricity transmission towers, power poles and gas mains. It is listed on both the ASX and the Singapore Stock Exchange.

Ausnet receives takeover offer

Ausnet announced that it has received a non-binding takeover offer for $2.50 per share from Brookfield Asset Management. This offer follows a previous offer from Brookfield on 30 August 2021 for Ausnet at $2.35 per share, then revised up to $2.45 per share.

The newest offer of $2.50 per share represents a 26% premium to the Ausnet share price of $1.98 at close on the previous day (17 September 2021).

Currently, Brookfield has decided that the offer will be reduced to the extent that Ausnet pays or declares a dividend before the implementation of the transaction.

What happens now?

The Ausnet board has decided that it is in the best interests of shareholders to allow Brookfield to perform exclusive due diligence so it is able to make a binding offer. Brookfield and Ausnet have entered into a confidentiality deed so Brookfield can go ahead with the due diligence.

The exclusivity arrangement will be active for seven weeks, with the option to terminate exclusivity only after the seven weeks have passed.

Ausnet said the board’s current intention is to recommend the takeover if Brookfield does make a binding offer at $2.50 per share. As long as no better offers come along.

The offer is in the early stages and is subject to a long list of common conditions such as due diligence, regulatory approval and independent expert review.

The board also noted that there is no guarantee that Brookfield will decide to go ahead.

Summary thoughts on Ausnet and the share price

This offer price of $2.50 is around 20.8% higher than the highest share price Ausnet achieved of $2.07 on 16 October 2020.

The current Ausnet share price is up 18% at the time of writing to $2.33, which is 7.3% lower than the offer price.

If I were an Ausnet shareholder I would be stoked with this news. With the 7.3% potential gains still on the table I would consider whether redeploying the money now would give me better bang for my buck or if waiting to see how this plays out would be the better choice.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.

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