Shareholder CKI opposes APA bid for Australian gas distributor Envestra

PUBLISHED : Wednesday, 05 March, 2014, 1:38am
UPDATED : Wednesday, 05 March, 2014, 1:38am

Cheung Kong Infrastructure, the second-largest shareholder in takeover target Envestra, signalled its opposition to APA's bid for the rest of the Australian gas distributor, putting the deal in doubt.

CKI's representatives on the Envestra board, Dominic Chan and Ivan Chan, recommend that shareholders vote against the offer because it was not in their interests, Envestra said yesterday in a statement.

The vote was scheduled for May, company secretary Des Petherick said. If CKI voted against the acquisition, the deal would not go ahead, he said.

Envestra shares fell the most in five years yesterday on expectations the A$1.4 billion (HK$9.7 billion) offer will fail.

APA, whose pipelines deliver more than half of Australia's gas, already owns 33 per cent of Envestra and operates its networks and pipelines.

"The deal is in trouble," said Paul Johnston, an analyst at RBC Capital Markets. "Does APA sweeten the deal again to try to get the CKI directors to endorse the bid? That's the question."

APA ran the risk of upsetting its shareholders with a higher offer, Johnston said.

APA declined to comment.

Envestra fell 8.73 per cent yesterday to A$1.15, while APA dropped 0.15 per cent to A$6.57.

Based on APA's closing price, the takeover offer was equivalent to A$1.26 a share, Envestra said. Cheung Kong does not plan on making a public statement about its voting intentions, according to the Envestra statement.

The proposal must be approved by at least 75 per cent of Envestra shareholders.

Four other directors not affiliated with APA supported the bid, considered "fair and reasonable" by an outside adviser, Envestra said.

APA reached a deal with Envestra in December to buy the rest of the firm after raising its bid.

Shareholders will have the option to receive either 0.1919 APA shares for each of their shares, or a combination of stock and cash, APA said in December. That was the equivalent of A$1.17 a share, based on APA's price at the time of A$6.10.

Dominic Chan is chief financial officer of CKI, and Ivan Chan is chief investment officer, Envestra's website shows.