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Canadian bid for pipeline 'cash and clean'

CANADIAN interest in buying Australian infrastructure assets shows no signs of flagging, with a pension fund yesterday taking part in a takeover for a pipeline network less than a week after another group took a stake in Sydney's desalination plant.
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InvestSMART
By InvestSMART · 16 May 2012
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By InvestSMART ·
16 May 2012
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CANADIAN interest in buying Australian infrastructure assets shows no signs of flagging, with a pension fund yesterday taking part in a takeover for a pipeline network less than a week after another group took a stake in Sydney's desalination plant.

Caisse de depot et placement du Quebec has teamed up with Utilities Trust of Australia in a 50-50 partnership to bid $2.30 cash a share for Hastings Diversified Fund, which owns gas pipelines in several parts of the country. The offer is worth $1.25 billion.

The bid is significantly higher than the scrip and cash offer already on the table from rival pipeline owner APA Group, which is worth about $2 a share. APA is offering 0.326 APA shares and 50? cash for each Hastings Diversified share held.

The APA bid is subject to scrutiny from the Australian Consumer and Competition Commission and last week APA offered to sell one of the Hastings Diversified assets, a pipeline from Adelaide to Moomba, to overcome ACCC concerns.

Investors welcomed the counter offer from the Canadian-Australian partnership, pushing Hastings Diversified shares to as high as $2.41 at one stage during trading yesterday, before closing at $2.38, up 27?, with 5 per cent of the capital changing hands. APA is expected to lift its offer for Hastings Diversified if it wins ACCC clearance.

Analysts estimated Hastings Diversified shares to be worth up to $2.40 in a contested takeover.

"Caisse has been looking at the asset for some time," an advisor to the company said yesterday. "It is typical of the assets they look for."

Caisse has an investment in pipeline assets in north America, and has co-invested previously with Utilities Trust of Australia in assets in Britain.

"It's cash, and it's clean," the chief executive of Hastings Diversified, Colin Atkin, said of the latest offer. "It is a superior proposal to the one we have on the table."

Last week, Ontario Teachers' Pension Plan teamed up with Utilities Trust of Australia and The Infrastructure Fund to pay $2.3 billion to take a long term lease over the Kurnell desalination plant.

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Frequently Asked Questions about this Article…

The bid is from Caisse de depot et placement du Quebec in a 50-50 partnership with Utilities Trust of Australia. They teamed up to make a cash offer for Hastings Diversified Fund, which owns gas pipeline assets around Australia.

The Canadian-Australian partnership offered $2.30 in cash per Hastings Diversified Fund share, a proposal reported to be worth about $1.25 billion in total.

The Canadian offer is a higher all-cash bid. APA Group made a scrip-and-cash offer that the article says is worth about $2.00 a share, consisting of 0.326 APA shares plus a cash component, and is subject to regulatory scrutiny.

APA’s bid is subject to review by the Australian Competition and Consumer Commission (ACCC). To address ACCC concerns, APA offered to sell one asset (the Adelaide-to-Moomba pipeline), but ACCC clearance will influence whether APA can complete the transaction or needs to alter its offer.

Investors welcomed the counteroffer: Hastings Diversified shares rose as high as $2.41 during trading and closed at $2.38. Trading volume was notable, with about 5% of the company’s capital changing hands, and analysts put a contested-takeover valuation at up to $2.40 a share.

The article notes strong interest from Canadian pension funds in stable, long‑life infrastructure assets. Caisse has pipeline investments in North America and previously co-invested with Utilities Trust in Britain, indicating these kinds of assets fit their long-term investment strategy.

Hastings Diversified’s chief executive, Colin Atkin, described the Canadian bid as “cash, and it’s clean,” calling it a superior proposal to the one already on the table from APA Group.

Yes. The article reported that Ontario Teachers’ Pension Plan, together with Utilities Trust of Australia and The Infrastructure Fund, agreed to pay $2.3 billion for a long-term lease of the Kurnell desalination plant in Sydney.