Citigroup advises Cheung Kong on Envestra bid

Cheung Kong needs only 50 per cent of Envestra’s shareholders to accept its takeover offer but it requires Foreign Investment Review Board Approval and wants to conduct due diligence.

Citigroup is advising Cheung Kong on its takeover bid for gas distributor Envestra which is also the subject of an offer from its biggest shareholder APA, advised by Rothschild, Data Room reporting has discovered.

A group of Cheung Kong companies offered $1.32 a share for Perth-based Envestra, which controls 24,100 kilometres of a network for gas distribution. At 1.58 pm Envestra shares had surged 20.5 cents, or 18 per cent, to $1.335.

Cheung Kong’s bid is worth $4.04 billion on a total enterprise value that includes $2.06bn of net debt and $1.96bn of equity, according to Bloomberg data. Billionaire Li Ka-shing’s Cheung Kong Group is Envestra’s second-biggest shareholder with a 17.5 per cent stake.

APA, has a 33 per cent stake, and made a takeover offer for Envestra - which is  is being advised by Goldman Sachs - in December now valued at $1.32 a share.

Cheung Kong can block APA’s takeover offer for Envestra as it requires 75 per cent approval and APA cannot vote on its own offer.

Cheung Kong needs only 50 per cent of Envestra’s shareholders to accept its takeover offer, but it requires Foreign Investment Review Board Approval and wants to conduct due diligence.

Four of the eight Envestra’s directors, who are not employees of APA or Cheung Kong, will meet to consider both takeover proposals. A May 13 vote on the APA takeover will be postponed.

Last year, Citigroup promoted Sydney-based Philip Graham to co-head of Asia Pacific energy, power and utilities investment banking. The investment bank has advised on several deals with value over $10bn, including fund manager QIC’s acquisition of the Moomba to Adelaide Pipeline System from APA and Santos' sale of its 40 per cent stake in the Gladstone liquifieid natural gas project to Malaysia’s Petronas.

(Reporting by brett.cole@businessspectator.com.au)

(Editing by miranda.maxwell@businessspectator.com.au)