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Australian gas pipeline owner Hastings backs bid

by Paul Whitfield | Published July 13, 2012 at 8:57 AM

Australian gas pipeline owner Hastings Diversified Utilities Fund, or HDF, has accepted a A$2.05 billion ($2.08 billion) offer from a consortium led by its own fund management company, Hastings Fund Management Ltd.

Hastings Fund Management's Utilities Trust of Australia and Canadian pension fund Caisse de dépôt et placement du Québec, which are bidding as Pipeline Partners Australia Pty Ltd., on Friday, July 13, made a binding offer of A$2.35 per HDF security.

The per-unit price includes a cash payment of A$2.325 and a separate distribution of A$0.025 per HDF unit, to be made by HDF itself to its unitholders before the takeover is finalized.

The terms are in line with Pipeline Partners' mid-May indicative offer, which topped an earlier cash-and-share offer from APA Group, a second operator of Australian gas pipelines. The APA offer was A$0.50 in cash and 0.326 of a share, and was worth A$2.12 per share based on APA's Friday closing price of A$4.96.

"HDF has entered into a Bid Implementation Deed (BID) with Pipeline Partners Australia in relation to the offer, which values HDF's equity at A$1.232 billion," the target said.

Pipeline Partners had been scrutinizing the books of HDF since mid-May. It was initially granted 45 days to conduct its due diligence and HDF agreed to pay an A$5 million breakup fee if its directors rejected a binding offer.

Based on the A$2.325 per security offer, the bid represents a 31.4% premium to HDF's unit closing price of A$1.77 on Dec. 13, the day before APA made its offer.

The Pipeline Partners offer is subject to the support of 70% of HDF stockholders. Pipeline Partners said that Australia's Westpac Banking Corp. had already agreed to tender its 8.1% stake in HDF.

The offer has already received clearance from the relevant Australian regulators, giving it a major advantage over the rival APA offer, which has attracted the attention of the Australian Competition and Consumer Commission. APA in May offered to sell assets to win the approval of the regulator.

"We will examin the PPA [Pipeline Partners] proposal...and will consider our position," APA managing director Mick McCormack said in a statement. "Our immediate focus remains continuing to work with the ACCC."

HDF's units, which are listed on the Australian Securities Exchange, closed Friday at A$2.33.

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