AusNet to engage with APA from Oct 19 after Takeovers Panel ruling

AUSTRALIAN energy company AusNet Services (AusNet) announced on Friday (Oct 15) its intention to engage with Australian gas pipeline operator APA Group (APA) on its proposed acquisition of AusNet for A$9.96 billion (S$9.77 billion).

The cash-and-stock deal involves a combination of A$1.82 cash and 0.0878 APA stapled securities per share, amounting to A$2.60 per share.

AusNet's announcement follows final orders announced by the Australian government's Takeovers Panel - in response to the application previously submitted by APA - that the no-talk restriction in the confidentiality deed signed with Brookfield Asset Management will be "of no force and effect" as at 5 pm (Melbourne time) on Oct 19.

Earlier in September, APA extended a conditional deadline in its takeover offer for AusNet, after its application to the Takeovers Panel to scrap exclusivity arrangements between AusNet and Brookfield.

AusNet, which is partly owned by Singapore Power, in its bourse filings noted that the latest takeover proposal from APA contained a "much simpler structure" than their original Sep 1 proposal of A$2.32 apiece.

It also noted that the current Brookfield proposal represents a material increase from APA's original indicative cash and scrip proposal received on Sep 1, and has "enhanced competitive tension and facilitated the making of the current APA proposal".

"The current APA proposal has an implied value of A$2.58 per AusNet share based on APA's closing price of A$8.63 per security on Oct 14, 2021," added the board.

AusNet however said that based on the confidentiality deed signed with Brookfield, the group is obliged to reimburse Brookfield's transaction costs of up to A$5 million in "certain circumstances".

In addition to exclusivity, such reimbursement was a key condition to Brookfield's willingness to proceed with its conditional offer of A$2.50 apiece.

Agreeing to such a condition was necessary in order to secure Brookfield's latest proposal and to initiate the resultant competitive tension, said AusNet's board.

As such, this provision - along with the no shop restriction and notification of approaches obligation - remains in force and unaffected by orders from the Takeovers Panel.

Under AusNet's Sep 21 filing for the company, the no shop restriction mandates that AusNet must not solicit, invite, encourage or initiate any competing proposals with Brookfield's takeover offer - except with prior written consent of Brookfield.

The notification of approaches obligation requires AusNet to give Brookfield notice in writing if it receives a competing proposal.

AusNet emphasised in its Oct 15 filing that there is no certainty that either Brookfield, nor APA, will submit a binding proposal. The company added that shareholders do not need to take any action in the interim, and that it intends to keep the market informed on this matter.