Cheung Kong

Duet to evaluate A$7.3 billion takeover bid from Cheung Kong Infrastructure

The Australian energy infrastructure firm advised shareholders to take no action over CKI’s ‘unsolicited, incomplete’ bid

PUBLISHED : Monday, 05 December, 2016, 4:04pm
UPDATED : Monday, 05 December, 2016, 10:57pm

Australian energy infrastructure firm Duet Group says it is evaluating a A$7.3 billion (HK$42 billion) takeover bid from Hong Kong tycoon Li Ka-shing’s Cheung Kong Infrastructure, but has advised shareholders to take no action due to uncertainty over whether the proposal will proceed further.

The Sydney-based natural gas pipeline operator said it has “recently received an unsolicited,

indicative, incomplete, non-binding and conditional proposal” from CKI to pay cash for all of its shares at A$3 each.

At this time security holders are advised to take no action as there is currently no certainty the proposal will proceed further
Duet Group statement

“The boards of the Duet Group are currently evaluating the proposal and at this time

security holders are advised to take no action as there is currently no certainty the proposal

will proceed further,” Duet said in a filing to Australia’s stock exchange on Sunday.

CKI’s spokesman has not responded to emails seeking comments.

The offer price is 27.7 per cent higher than Duet’s closing price of A$2.35 on Friday. Its shares jumped 16.8 per cent at 3:05 pm Monday Sydney time after trading as high as A$2.82 soon after the market opened.

CKI shares closed the morning trading session 0.5 per cent lower at HK$64.35 on Monday.

Duet’s Friday closing price represents 27 times its earnings per share for the 12 months to June 30. CKI Friday closed at 15.5 times its last year’s earnings.

CKI and its 38.9 per cent-held utility unit Power Assets have built a large portfolio of infrastructure and energy businesses overseas in recent years in an effort to diversify its regulated businesses primarily in overseas developed markets.

Chairman Victor Li Tzar-kuoi, Li’s eldest son, said in the firm’s July interim results announcement CKI would continue to seek “expansion and growth opportunities” in both existing and new markets and industries.

It will evaluate each opportunity with “stringent investment criteria” and will not approach them with a “must-win” mentality, he added at the time.

The latest bid for Australian assets comes after the Australian government in August rejected CKI and Power Assets’ bid for the nation’s largest energy grid in New South Wales state, citing national security concerns. The asset was sold to an all-Australian consortium for A$16.2 billion.

Duet posted a net profit of A$217.2 million (HK$1.25 billion) before accounting for non-recurring and non-operating items for the 12 months to June 30, up from A$45.9 million in the previous financial year.

CKI, which has operations in Hong Kong, mainland China, Britain, Australia, New Zealand, Holland and Portugal, had a net profit of HK$5.51 billion in the six months to June 30.

Duet’s revenue surged 29 per cent to A$1.64 billion, lifted by contributions from the acquisitions of Energy Developments and the purchase of the 20 per cent of DBP Transmission it did not already own.

DBP owns and operates the 1,600-kilometre Dampier-to-Bunbury natural gas pipeline, linking gas fields in northwestern West Australia state and major consumption centres in the southwestern part of the state.

DBP, whose revenues are almost entirely derived from contracted or regulated tariffs, contributed A$305 million, or 29 per cent of Duet’s earnings before interest, taxes, depreciation and amortisation (ebitda) in the 12 months to June 30.

Duet’s second largest profit contributor was 66 per cent-owned United Energy, which distributes electricity to around 665,000 customers in communities east of Melbourne. It made an ebitda of A$382 million, or 28 per cent that of Duet.

Energy Developments, a Brisbane-based firm that generates power from waste coal mine gas, landfill gas and other renewable energy in Australia, Europe and the United States, contributed 25 per cent of Duet’s ebitda.

Wholly-owned Muiltinet Gas, which distributes natural gas to 692,000 customers in Melbourne and nearby regions and collects mainly regulated tariffs, took up 14 per cent of Duet’s ebitda.