SYDNEY (Reuters) - Australian gas distributor APA Group (APA.AX) said it is raising its hostile bid for rival Hastings Diversified Utilities Fund HDF.AX by 21 percent to A$1.33 billion ($1.37 billion), beating a competing offer from a consortium that includes a Canadian fund.
At stake for the bidders are two key gas pipelines owned by Hastings that serve Australia’s main onshore gas hub, Moomba, with strong growth prospects from new coal seam gas projects and huge liquefied natural gas export projects in Queensland state.
APA will now offer at least A$0.60 cash and a fixed amount of APA securities, bringing the bid to at least A$2.50 per share. The revision had been anticipated after APA’s earlier offer received regulatory approval last week.
APA said on Wednesday it hopes to formalize the new offer in about a week after completing due diligence.
The offer trumps a bid of $1.25 billion, or A$2.325 per security, from Pipeline Partners Australia (PPA), a consortium including fund manager Caisse de depot et placement du Quebec (CDPQ) and Utilities Trust of Australia, a fund managed by HDF’s manager Hastings Funds Management.
HDF, which snubbed APA’s earlier approach in favor of the consortium’s offer, said on Wednesday it was calling a meeting of independent directors to consider the new offer.
Jason Teh, a portfolio manager at Investors Mutual, which owned APA shares but sold them earlier this year, said the improved bid was a serious contender as it decreased the likelihood of any other suitor entering the race.
“It comes down to cost of capital; whoever has lower costs of capital will win the game,” Teh said.
HDF shares had climbed 2 percent on Wednesday to A$2.54 by 255 GMT. APA shares were down 0.6 percent.
The Australian Competition and Consumer Commission said last week it would agree to APA’s takeover after accepting the company’s undertaking to sell its Moomba to Adelaide Pipeline System (MAPS).
APA also said on Wednesday it would waive a 90 percent minimum-ownership condition when it has obtained 70 percent of the shares.
A number of other conditions would likely be waived once due-diligence was completed, making the offer “significantly less conditional” than the PPA offer, APA managing director Mick McCormack said in a statement.
APA said the offer value increases to $2.525 when a cash distribution of A$0.025 per share, due to be paid in August to shareholders registered at June 29, is included.
APA made in December an A$1.1 billion bid, comprising A$0.50 and 0.326 of its shares for each HDF security. ($1 = 0.9739 Australian dollars)
Editing by Muralikumar Anantharaman