Hastings in favour of Pipeline's $1.2b offer

THE long-running takeover for the pipeline owner and operator Hastings Diversified is moving into the final lap, with the independent directors recommending a friendly bid from a party associated with the company.

By InvestSMART · 14 Jul 2012

By InvestSMART ·
14 Jul 2012

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The recommendation comes before the final decision from the competition regulator regarding a rival bid from APA Group, the biggest in the industry, which is due next week.

If the Australian Competition and Consumer Commission clears APA of the competition concerns related to its offer, APA is expected to pitch its bid closer to the $2.32? offer on the table, which is well above APA's opening bid of about $2.

Yesterday the independent directors of Hastings Diversified accepted a $1.2 billion offer from Pipeline Partners Australia, which is controlled jointly by Hastings-group member Utilities Trust of Australia and Caisse de depot et placement du Quebec.

Utilities Trust has a 40 per cent holding in Pipeline Partners, and two Canadian investors, Kindle Capital and CN Investments, hold 10 per cent.

An independent assessment of the Pipeline Partners bid is yet to be made but Westpac has opted to accept the offer for its 8.1 per cent holding in Hastings, even though the competition regulator is yet to decide whether the APA offer can proceed.

As the owner of the management companies of both Utilities Trust and Hastings Diversified, Westpac's quick decision has raised questions over whether it is putting its own corporate interests ahead of other shareholders.

The Pipeline Partners offer has several conditions, including a stipulation that it must gain control of 70 per cent of Hastings Diversified's capital.

APA is offering 50? in cash and 0.326 APA shares, less any distributions paid this year.

The offer is subject to a 90 per cent minimum acceptance condition.

APA already has a 21 per cent stake in Hastings Diversified.

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Frequently Asked Questions about this Article…

What is happening in the Hastings Diversified takeover?

The long-running Hastings Diversified takeover is moving into the final stages. Independent directors have recommended — and accepted — a friendly $1.2 billion offer from Pipeline Partners Australia, while a rival bid from APA Group is still awaiting a competition regulator decision that is due next week.

Who are Pipeline Partners Australia and who controls the $1.2 billion offer?

Pipeline Partners Australia is a consortium controlled jointly by Utilities Trust of Australia and Caisse de depot et placement du Quebec. Utilities Trust has a 40% holding in Pipeline Partners, and two investors (Kindle Capital and CN Investments) each hold 10%.

What did Hastings Diversified’s independent directors recommend about the Pipeline Partners offer?

The independent directors recommended a friendly bid from a party associated with Hastings and accepted Pipeline Partners Australia’s $1.2 billion offer. An independent assessment of the bid is still outstanding.

What is APA Group offering and what role does the competition regulator (ACCC) play?

APA Group has lodged a rival bid and already owns about 21% of Hastings Diversified. The ACCC’s decision on competition concerns is due next week; if the ACCC clears APA, the company is expected to increase its offer closer to the roughly $2.32 per‑share level referenced in reports. APA’s offer includes a cash component plus 0.326 APA shares (less any distributions this year) and is subject to a 90% minimum acceptance condition.

What key conditions are attached to the Pipeline Partners Australia offer?

The Pipeline Partners offer includes several conditions, notably a requirement that it must gain control of 70% of Hastings Diversified’s capital for the deal to proceed.

Why did Westpac accept the Pipeline Partners offer for its Hastings stake, and are there conflict-of-interest concerns?

Westpac opted to accept the Pipeline Partners offer for its 8.1% holding in Hastings Diversified even though the competition regulator has not yet decided on APA’s bid. Because Westpac is the owner of the management companies for both Utilities Trust and Hastings Diversified, its quick acceptance has raised questions about possible conflicts between its corporate interests and the interests of other shareholders.

How could APA’s existing 21% stake in Hastings Diversified affect the takeover outcome?

APA’s roughly 21% holding gives it a meaningful position in the contest. The outcome will hinge on the ACCC’s decision about competition concerns and whether APA chooses to raise its offer. Any higher bid from APA could alter shareholder choices and the likelihood of meeting the required acceptance thresholds.

What should everyday investors watch for next in the Hastings Diversified takeover?

Investors should watch the ACCC decision due next week on APA’s bid, any independent assessment of the Pipeline Partners offer, whether the 70% (Pipeline Partners) or 90% (APA) acceptance thresholds are met, and any revised offers from APA or responses from major shareholders such as Westpac.