APA Group Shares: Launches AusNet Takeover Bid (ASX:APA)

The APA Group [ASX:APA] share price are sliding after making a non-binding indicative proposal to acquire AusNet Services by way of a scheme arrangement for $2.60 per share in cash and scrip.

APA’s offer comes a day after Brookfield Asset Management made its own offer to acquire AST for $2.50 per share — a 26% premium to AusNet’s closing price of $1.98 on Friday.

APA share price are currently trading at $8.51 apiece, down 4.17% at time of writing.

ASX APA - APA Group Share Price Chart

Source: Tradingview.com

APA shares have floundered this year, losing nearly 17% over the last 12 months.

APA launches bid for AusNet

APA has made a non-binding indicative proposal to acquire AusNet by way of a scheme arrangement for $2.60 per share in cash and scrip.

The takeover discussion was going on for a few weeks, so let’s look at the developments from that time frame.

APA made its first confidential offer of $2.32 per share on 1 September.

Later, both parties engaged in discussions about the Original Proposal and APA declared on Thursday, 16 September, that it intends to make a revised proposal.

However, APA mentioned that it was disappointed that AusNet granted Brookfield an eight-week period of exclusivity.

APA Managing Director and CEO Rob Wheals commented:

The proposal would bring together two high quality businesses and create a listed flagship Australian group with the scale and capability to accelerate the $20 billion growth in electricity transmission infrastructure needed to support the decarbonization of Australia’s economy.

Unlike many OECD countries, Australia lacks a locally owned and controlled energy utility with capabilities across critical energy infrastructure and with the size and strength to partner with government and the community to deliver the energy transition.

The combination of APA and AusNet is a unique opportunity to deliver that vision and retain a proudly Australian controlled combined group listed on the ASX.

HOODWINKED! Why Australia’s ‘miracle’ economy is a farce

What next for the APA share price?

As the Financial Review reported, today’s developments are stoking a thrilling M&A battle, with a $17 billion poles and wires group at stake.

It is also the year’s first big M&A deal to be contested.

To date, the first serious bids for Oil Search Ltd [ASX:OSH], Sydney Airport [ASX:SYD], Afterpay Ltd [ASX:APT], and Spark Infrastructure have gone uncontested.

APA argues acquiring AST will bring together two ‘established and complementary Australian energy infrastructure businesses’ to create Australia’s largest energy transmission and distribution infrastructure utility, with total assets of $29 billion.

APA thinks the acquisition can create a flagship Australian company with the scale to accelerate the ‘$20 billion growth in electricity transmission infrastructure needed to support the decarbonisation of Australia’s economy.

If APA’s proposal is successful and it can capture the growth entailed in decarbonising Australia’s economy, it could positively affect its dividend payouts — always a big factor with stocks of APA’s nature.

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Kiryll Prakapenka,
For The Rum Rebellion

PS: The Rum Rebellion is a fantastic place to start your investment journey. We talk about the big trends driving the Australian Economy. Learn all about it here.

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