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APA makes a third bid for Hastings

by Paul Whitfield | Published August 17, 2012 at 9:26 AM

Australia's version of the battle of Hastings was rejoined Friday, August 17, when Australian pipeline operator APA Group made a third bid for local rival Hastings Diversified Utilities Fund, increasing its offer to as much as A$1.39 billion ($1.5 billion).

The new proposal tops a rival bid from Pipeline Partners Australia Pty. Ltd., which two days earlier improved its all-cash offer for the operator of two key gas pipelines to A$1.3 billion.

APA is offering A$0.80 in cash and of 0.39 APA securities for each HDF share, an increase of $0.18 per share in cash for each of its target's securities. The bid equates to an implied value of A$2.63 per HDF security, based on APA's Thursday closing price of A$4.70.

The increase in the cash component is premised on APA gaining at least 90% of its target. If APA wins between 70% and 90% of HDF then the cash component of the bid will be limited to A$0.72, leaving the bid at A$2.55 per HDF security.

Even at the lower price the offer tops Pipeline Partners all cash bid of A$2.43 per share.

APA's offer values HDF at about A$2.19 billion, including the target's debt of about A$800 million.

The new bid was enough to sway the favor of HDF's directors, who are backing the Pipeline Partners bid. But on Friday they warned that the offer will have to be increased or lose the board's support.

"Pipeline Partners has until midnight on Tuesday, 21 August 2012 to either provide an equivalent or superior outcome for HDF Securityholders relative to the revised APA offer," HDF said.

HDF units, which are listed on the Australian Securities Exchange, closed Friday at A$2.59, slightly below APA's most recent bid.

HDF's value has climbed about 46% from A$1.77 since Dec. 13, the day before APA surprised the market with an initial offer of A$1.99 per HDF unit.

Pipeline Partners is a consortium led by Canada's Caisse de Dépôt et placement du Québec and Utilities Trust of Australia, an investment vehicle led by HDF's own fund management company, Hastings Fund Management Ltd. It made its initial bid in May.

"APA's offer is clearly superior to the current PPA (Pipeline Partners) offer now on the table for HDF," said APA Group Chairman Len Bleasel in a statement. "This is the case when using any price at which APA securities have traded since APA announced its takeover offer on 14 December - from A$4.46 to A$5.34 - as well as when using the value range for APA securities of A$4.80 to A$5 determined by Grant Samuel, the independent expert."

HDF owns 100% of Epic Energy, which in turn owns and operates two key pipelines that run from Australia's main onshore gas hub, Moomba, to Adelaide in the south and Queensland in the east of Australia.

The Australian Competition and Consumer Commission in July cleared APA, which is already a major owner of Australian gas pipelines, to bid for HDF, on the condition that it agreed to sell the Moomba-to-Adelaide pipeline, known as MAPS, if its bid is successful.

Shares in APA closed Friday at A$4.65, down A$0.05 or 1%, leaving its higher offer for HDF at A$2.61.

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Tags: APA Group | Australia | Hastings Diversified Utilities Fund | M&A | pipeline

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APA makes a third bid for Hastings

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