APA Group (ASX: APA)

Unsolicited Proposal from consortium led by CKI - APA is one of the leading Australian energy infrastructure business, owning and/or operating in excess of $20 billion of energy infrastructure assets. The Group has gas transmission pipelines span in every state and territory on mainland Australia and caters to almost half of the nation’s gas usage. Recently, the Group received an unsolicited proposal from a consortium that is led by CK Infrastructure Holdings Limited (CKI) that comprises of CKI, CK Asset Holdings Limited (CKA) and Power Assets Holdings Limited (together, the Consortium). The proposal was to acquire all of the stapled securities in APA through trust schemes. It is an indicative and a non-binding proposal and total consideration has been slated to be about $13 billion in cash.

The price for each share has been indicated to be A$11.00 in cash. The proposal also includes a distribution of not exceeding 24.0 cents per stapled security that is payable in respect of the six months to 30 June 2018. It was advised that securityholders should not take any action at this stage as there is no certainty that the proposal will result in a transaction. Moreover, the proposal is subject to a number of conditions like majority shareholders’ approval will be required and it needs a proper due diligence. The Directors of the Group intended to support and vote in favour of the scheme.


Growth Project Schedule (Source: Company Reports)

The Consortium informed APA that it had discussions with and provided information to both FIRB and the ACCC. Moreover, in respect of the ACCC, the Consortium proposed a divestment package which would include APA’s interests in the Goldfields Gas Pipeline, Parmelia Gas Pipeline, Mondarra Gas Storage Facility and a standalone management team. The proposal is not conditional on the basis of these proposed divestments occurring before completion of the transaction. For conducting due diligence on a non-exclusive basis, APA has entered into a confidentiality agreement with CKI.

The Board will continue to evaluate the feasibility of the proposal and will update APA’s security holders and the market as appropriate. The management is confident that the Group has a very attractive business and is well positioned to continue delivering strong results and ongoing growth irrespective of whether the proposal materialises or not. Lately, it also entered into two key agreements in relation to its proposed liquefied natural gas (LNG) import jetty at Crib Point in Victoria. One was Development and Gas Transportation Agreement for the development and construction of the Crib Point Pakenham Pipeline and another was works, lease, and berthing and Jetty Agreement with the Port of Hastings Development Authority for the long-term use of Crib Point Jetty Berth 2. In the meantime, the Group is progressing its environmental approvals and licencing requirements for the project and continues to negotiate further key commercial arrangements for LNG supply. Since, one year, the stock prices have been falling and were down by 12.98 per cent. In the past five days, the prices slipped by 3.05 per cent but witnessed a huge recovery of 20.92 per cent as on 13 June 2018. We give a “Hold” recommendation at the current market price of $10.00 as it’s better to wait and watch for the impact from acquisition along with other some synergy benefits from agreements.

 
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