Management move opens the way for a takeover

DUET Group, a $2.3 billion listed infrastructure fund, has proposed internalising its management — bringing management in-house instead of being externally managed. The article says that internalising management could be followed by a takeover offer because removing external-management barriers (like contractual defenses) often makes a listed fund easier to acquire.

Externally managed funds frequently include contractual conditions and 'poison pill' provisions in their management agreements that make hostile approaches and takeovers difficult. The article notes these obstacles are a key reason internalising management can open the way for takeover offers.

If DUET’s internalisation is approved, the joint external managers AMP and Macquarie Group are estimated to receive about $98 million in a mix of cash and securities as compensation for giving up management rights.

DUET’s portfolio includes infrastructure investments such as the Dampier Bunbury Pipeline, United Energy Distribution and Multinet Gas — assets typical of listed infrastructure funds that provide regulated or contracted cash flows.

Yes. The article describes a broader shift away from externally managed listed infrastructure funds because many charged high fees and had potential conflicts with investors’ interests. It notes DUET would be one of the last to internalise after Macquarie previously raised more than $400 million in 2009 by internalising a suite of managed listed funds.

DUET was established in June 2003 as a wholesale unit trust and listed on the ASX a year later. AMP set up a joint venture by selling 50% of the entities that held DUET’s management rights to Macquarie, creating the AMP–Macquarie joint external management arrangement described in the article.

The article highlights active takeover interest elsewhere: Hastings and Hastings Diversified Utilities Fund were facing competing bids from Pipeline Partners and APT Pipelines. It also mentions Australian Infrastructure Fund and Hastings Funds Management were in talks about internalising management — demonstrating broader M&A activity in the sector.

The Takeover Panel declined proceedings on an application from investor AFIC concerning Hastings, which had sought a full independent evaluation of internalising management in the context of Pipeline Partners’ takeover bid. For investors, the decision shows regulators are actively involved in takeover disputes and that independent evaluations can be a point of contention during competing bids.