The first formal bid from Brookfield of $2.50 per share only arrived in AusNet’s letterbox yesterday.
AusNet owns $11 billion of regulated and contracted electricity and gas infrastructure located in Victoria.
Hey, what about us?
APA Group announced today it has made a $2.60 cash and scrip bid for AusNet.
What’s a cash and scrip bid you may ask?
In layman’s terms, it’s where the bidder (APA) offers its shares either partly or wholly to the existing shareholders of the target company (AusNet). In this case, APA is offering both cash and shares.
The main benefit of offering shares instead of cash is that it delays the trigger of a capital gains tax (CGT) event.
$1.82 would be paid in cash and AusNet shareholders would receive 1 share in APA Group for every 11.3 AusNet shares held.
The offer is a 31% premium to AusNet’s share price prior to the two takeover proposals. It is also 10 cents higher than the offer made by Brookfield yesterday.
APA noted it originally made a $2.32 per share offer on 1 September. Subsequently, APA informed AusNet of its intentions to revise this offer on 16 September.
“APA is disappointed that AusNet has purported to enter into a period of exclusivity with Brookfield for effectively eight weeks, notwithstanding AusNet’s knowledge of the pending revised, and potentially superior proposal, from APA”.
Which offer should AusNet choose?
APA conveniently outlined a number of benefits of its proposal compared to Brookfield’s including:
- A higher offer price of $2.60 compared to $2.50
- Opportunity for Australian investors to retain exposure to AusNet through APA
- Synergy benefits from a combined entity
- CGT rollover relief for the shares offered in APA
- No Foreign Investment Review Board (FIRB) approval
- Faster due diligence process of four weeks compared to the eight weeks granted for Brookfield
It is worth noting there are also limitations to AusNet’s proposal. Major shareholders such as Singapore Power may not wish to receive shares in the APA group, preferring the all-cash offer from Brookfield.
Further, the APA Group proposal may not be subject to FIRB approval, but will potentially attract scrutiny from the Australian Competition and Consumer Commission (ACCC).
Brookfield v APA Group
APA is set to tee off against Brookfield for control over AusNet.
Today’s announcement by APA is a big first punch at both Brookfield and the AusNet board.
Disclosing a superior offer (at least on price) potentially forces Brookfield to make another move. Moreover, it’s made the AusNet board look silly for granting exclusive due diligence without at least listening to APA’s new offer.
I suspect the $2.50 all-cash offer from Brookfield is still more attractive than the $2.60 proposal by APA. But don’t expect APA to go down without a fight.