Brookfield Wins Australia’s AusNet with $7.7 Billion Deal

(Bloomberg) -- Australian electricity and gas distribution company AusNet Services has agreed to a binding takeover offer from a consortium including Brookfield Asset Management in a deal that values the business at A$10.2 billion ($7.7 billion). 

AusNet said its board unanimously supports the A$2.65 per share offer from the group, which also includes pension funds Sunsuper Pty Ltd, Alberta Investment Management Corp., the Investment Management Corp. of Ontario and Healthcare of Ontario Pension Plan. Including debt, the deal is worth A$17.8 billion, Ausnet said in a statement Monday.

The agreement will further antagonize local rival suitor APA Group, which owns gas pipelines and has been seeking to create a regional champion of gas distribution with a A$9.96 billion offer that was rebuffed. APA appealed to Australia’s takeover panel in September to force its target to entertain the offer by allowing due diligence, which AusNet has closed off under the terms of the new deal. 

The agreed deal marks a 34% premium to AusNet’s share price of A$1.98 on Sept. 17, before Brookfield’s first approach with an indicative offer of A$2.50 per share was made public. AusNet shares rose 4.5% to A$2.58 at 12:08 p.m. in Sydney trading Monday. 

“Given that $2.65 significantly exceeds the indicative reserve price, the board believes it has a responsibility to convert it into a binding offer while retaining the ability to consider superior proposals,” AusNet said.

Brookfield Wins AusNet With Bid That Trumps APA: M&A Snapshot

“APA didn’t indicate that it would be able to offer a full cash alternative or the value level at which any improvement to its indicative proposal could be made,” AusNet said. “APA had been made aware that Brookfield might seek to make a revised proposal and were encouraged to have their best proposal in front of the AusNet Board at all times.”

In its own statement, APA said it still considers AusNet to be “highly attractive” but that it will continue to remain “financially disciplined.”  

A deal for the Melbourne-based utility, which calls itself the primary Victorian transmission network owner serving about 1.5 million customers in the southeast Australian state, would add another significant sum to an already busy year for Australian takeovers, led in large part by a trend of pension funds taking infrastructure assets private.

Brookfield and its partners see control of the business as an opportunity to make AusNet a multi-decade investment platform, with plans to spend at least as much as the acquisition cost again on adding new electric generation to the network out to 2050, not including upkeep, said Stewart Upson, Brookfield’s managing partner and regional head of Asia Pacific. 

“In Victoria, in particular, there’s a high current usage of gas, so over time there’s going to need to be a very large amount of new investment in both electricity transmission extensions and electricity connections to new renewable energy projects as we look to electrify the grid further in order to meet the increasing demand we expect from the proliferation of electric vehicles and household heating moving from gas to electricity,” Upson said in an interview. “We think that’s going to be tens of billions of dollars.”

AusNet’s largest shareholder, Singapore Power International Pte, supports the deal and intends to vote in favor of it. The company didn’t make any statement regarding the stance of State Grid Corp. of China, its second-largest holder.

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