Speculators jump into Hastings
HEDGE funds and other speculators bought heavily
HEDGE funds and other speculators bought heavilyinto takeover target Hastings Diversified yesterday, anticipating a bidding war after the Australian Competition and Consumer Commission gave APA Group the green light to pursue the company.APA launched a cash-and-scrip offer for Hastings Diversified, a pipeline owner, valuing it at about $2.10 late last year.Its offer has been eclipsed by a bid from Pipeline Partners Australia, a consortium of Canadian and local investors, offering $2.35.5 cash a share.In heavy trading yesterday, Hastings Diversified shares were pushed to a new high of $2.525, before closing at $2.485, up 13.5?, with more than 34 million shares changing hands. That is equal to more than 6 per cent of the capital.Late on Thursday, the ACCC allowed APA's bid to proceed, as long as it disposes of the Moomba-Adelaide pipeline. Analysts speculated that the pipeline is worth about $400 million, although UBS told clients it could be worth as much as $550 million.Analysts with UBS and Citi estimate APA could raise its offer to as high as $2.50 and still make the deal work for its shareholders."We think that APA could increase the cash component of the bid by another 40? [per share], implying a value of just over $2.50," Citi wrote in a research note. "This assumes the existing scrip ratio and APA share price of $5 per share."Separately, Deutsche said Pipeline Partners Australia could "easily pay about $2.45 for Hastings Diversified"."This also applies to APA; we estimate APA can pay up to around $2.60", based on the revenue outlook, Deutsche said.Concern that it could overpay saw APA shares marked down yesterday, shedding 12? to close at $4.96, due to worries that future cash flows and shareholder dividends might be hit.APA is expected to raise its offer next week, in return for access to the company's books for a detailed assessment.