Undaunted by Ausgrid Failure, HK Billionaire Li Ka-shing Bids USD5.4 Billion for Duet Group

Luo Qi

2016-12-07

(Yicai Global) Dec. 7 -- Li’s Cheung Kong Infrastructure Holdings Ltd [HKG:1038], plans to acquire Duet Group, an Australian power distributor and pipeline operator, with an offer of UD7.3 billion (USD5.4 billion).

Hong Kong billionaire Li Ka-shing failed in an earlier attempt in August to acquire the biggest power grid in Australia, Ausgrid. He has now made a move for another power company, Duet Group [ASX:DUE] to gain control of its pipeline assets.

At AUD3 a share, CKI’s bid values the company at a 28 percent premium, when compared to its Dec. 2 close of AUD2.35. On Dec. 6, the closing price of Duet Group was AUD 2.72. It is estimated by the market that the overall pricing of this transaction will reach about AUD 7.3 billion.

CKI already owns stakes in Australian infrastructure assets, including SA Power Networks, Powercor Australia and Australian Gas Networks.

CKI has sent the acquisition offer, Duet said, for 100 percent of the company’s outstanding shares. The board of directors is evaluating the viability of the offer and regulatory approvals are required.

Duet Group is a power grid company listed in Australia with a total asset of AUD11.1 billion. Its turnover grew by 150 percent from the previous year to AUD195 million. Company profits also grew 35 percent from last year.

Besides the power business, Duet’s assets include the Dampier-Bunbury pipeline in Western Australia, which supplies nearly all of Perth’s natural gas. In addition, Duet has a stake in power distributor United Energy, which is the service provider for rich communities in Melbourne.

It also has stakes in Multinet Gas, a gas distributor, pipeline operator DBP Development Group and Energy Developments Ltd., Duet’s official website said.

Cheung Kong Infrastructure’s Australian acquisitions can help it reduce its investment in the UK, which generates the most profits for their flagship CK Hutchison Holdings Ltd., a conglomerate which operates in ports and related services, retail, infrastructure, energy, and telecommunications.

The transaction will accordingly not influence its Standard and Poor's rating.

12 percent of CKI’s profits last year came from Australia, its 2015 company financial report said. The consecutive acquisition of infrastructure and energy industries in Australia by Li Ka-shing was an attempt to diversify overseas investment and further reduce the adverse impact brought about by the UK’s decision to leave the European Union.

As the Duet bid involves power supply and natural gas pipeline businesses, whether this transaction will be approved by the regulatory authorities is unclear.

CKI and State Grid Corporation of China’s joint AUD10 billion bid to acquire a controlling stake in state-owned Ausgrid, was blocked by the Australian government on Aug. 11, citing national security concerns.