Victor Li (李澤鉅), who last month succeeded his famed father as head of the CK (長江) group of companies, began his tenure with an A$13 billion (US$9.85 billion) bid for Australian gas pipeline operator APA Group Ltd, in what would be the Hong Kong-based conglomerate’s biggest overseas acquisition.
The cash offer, which was split among CK Asset Holdings Ltd (長江實業集團), CK Infrastructure Holdings Ltd (長江基建) and Power Assets Holdings Ltd (電能實業), was 33 percent higher than APA’s closing price on Tuesday.
APA shares yesterday surged as much as 24 percent to A$10.29 in Sydney trading, a record gain, but shy of the A$11-a-share bid.
The purchase would give Li a company that delivers about half of the nation’s gas and add to an Australian portfolio that already includes power distributor Duet Group.
APA fits the mold of utility or infrastructure firms — those generating stable cash flows — that CK companies have been targeting in the run-up to billionaire Li Ka-shing’s (李嘉誠) handover to his eldest son, indicating that the group’s penchant for safe assets will likely persist under the younger Li.
“This will be the first big deal after Victor took over the group,” said Linus Yip (葉尚志), strategist at First Shanghai Securities Ltd (第一上海證券). “If the deal is handled smoothly, Victor will be able to further prove himself internally and to investors.”
The deal would also represent more opportunity to diversify away from the UK, the CK empire’s biggest market, amid uncertainties tied to the country’s looming separation from the EU.
Shares of CK Asset yesterday closed down 0.8 percent, while CKI lost 0.3 percent and CK Hutchison Holdings Ltd (長江和記實業) unit Power Assets gained 0.3 percent in Hong Kong trading. The companies often team up to buy assets.
The purchase of APA, whose pipelines span every state and territory on mainland Australia, is subject to regulatory approvals.
Australia’s Foreign Investment Review Board is to examine the deal at a time the nation is struggling to ensure sufficient natural gas supplies, which has raised sensitivity over control of infrastructure and domestic producers.
Australia has encountered blackouts and rising energy costs amid a bungled transition away from coal that has left consumers with some of the highest power prices in the world.
The CK companies have held talks with the board and the country’s antitrust regulator, and offered to sell some assets, including APA’s interests in the Goldfields Gas Pipeline, Parmelia Gas Pipeline, Mondarra Gas Storage Facility.
Rising liquefied natural gas (LNG) exports and regional drilling bans have been blamed for tightening supply, forcing Australian Prime Minister Malcolm Turnbull to threaten limiting overseas sales and sparking efforts to begin importing LNG in high-demand areas.
Gas prices on Australia’s East Coast market could rise 30 percent over the next five years, driven mainly by declining low-cost domestic supply, consultant Wood Mackenzie Ltd wrote in a report on May 15.
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