Australian gas infrastructure giant APA Group has made merger proposal for gas distributor Envestra Ltd that values the target at $1.98 billion and would deliver it 1.2 million gas customers.
APA, which is Envestra's largest shareholder with a 33% stake, said it had put an all-share merger offer to Envestra's board.
Under the offer, Envestra shareholders would receive 0.1678 new APA stapled securities for each Envestra share and would be entitled to any final Envestra dividend for the 2013 financial year of up to 3 cents per share.
APA said the non-binding deal implied a value of $1.102 for each Envestra share - based on the closing price of APA shares of $6.38 on 15 July.
It also represented a premium of 10.6% to the one month volume weighted average price of $0.995 for Envestra shares.
APA already manages and operates Envestra’s gas distribution networks and pipelines under a long term operating and management agreement - a role that would continue under the new deal.
"The proposal values the equity of Envestra at $1.98 billion," APA said.
The combined group would have a market capitalisation of about $6.6 billion.
APA bought a 17.2% stake in Envestra in July 2007 and has since built its holding to 33%.
Envestra owns regulated natural gas distribution networks in South Australia, Victoria, Queensland and New South Wales, serving about 1.2 million gas customers.
APA chairman Len Bleasel said, "the combination of Envestra and APA is a logical next step in creating Australia’s preeminent energy infrastructure group with a diversified and integrated suite of assets".
"Envestra’s 22,500 km of natural gas distribution network, together with APA’s extensive pipeline infrastructure, will form a unique footprint of natural gas infrastructure assets."
The deal is subject to due diligence, financing approval, unanimous recommendation of Envestra’s board.