(Yicai Global) Nov. 8 -- Australia's treasury department looks ready to block CK Group's bid to buy APA Group, the country's largest natural gas infrastructure business, saying the proposed buyout is against the national interest.
In a statement to the CK Group, headed by CK Asset Holdings, Treasurer Joshua Frydenberg suggested that the acquisition was against Australia's national interest, The Paper reported today. Part of the business empire built by Hong Kong billionaire Li Ka-shing, CK Group had agreed to pay AUD13 billion (USD9.5 billion) for APA.
"I have formed this view on the grounds that it would result in an undue concentration of foreign ownership by a single company group in our most significant gas transmission business," Frydenberg said. "I intend to make a final decision under the formal process within two weeks."
The Li family has accumulated a wealth of assets in Australia's energy sector, but has been rejected once before. In October 2016, CK Infrastructure Holdings tried to acquire a controlling stake in the country's largest power grid company, Ausgrid, but the federal government blocked the acquisition on national security grounds.
Frydenberg's preliminary opinion, issued yesterday, was not aimed at the CK Group or its subsidiaries. The CK Group has been a key investor in Australia's natural gas and electricity sectors, and the Australian government welcomes its investment and contribution to the country's economy, Frydenberg added.
His statement did not come as a surprise. It has been speculated for a while that Australia's Foreign Investment Review Board and the Treasury would halt the acquisition despite being approved by Australia's antitrust regulator.
Analysts believe that the sale of APA Group, with its large natural gas pipeline and transmission network, to a Chinese enterprise would become an issue in the 2019 Australian federal elections.
Listed in 2000, APA Group is a big player in Australia's energy infrastructure sector. It has two subsidiaries, Australian Pipeline Trust and APT Investment Trust, and owns and manages a portfolio of energy assets in excess of USD20 billion. APA Group delivers 50 percent of the nation's natural gas usage to 1.3 million families and firms.
APA operates 15,000 kilometers of natural gas pipeline, has a 4,100 kilometers distribution network and natural gas storage facilities, natural gas power plants and wind power farms all over Australia. It provides third parties with asset management services and non-listed entities with energy investments as well as gas transmission, storage and processing business.
Up to Dec. 31 last year, APA Group's net consolidated assets were AUD4 billion, public data show.
A financial consortium led by CK Infrastructure, and includes CK Asset Holdings, CK Infrastructure and Power Assets Holdings, made a non-binding offer for APA Group in June. Sydney-based APA said it had signed a binding performance agreement on Aug. 13, with the consortium set to buy all its listed shares in cash for AUD11 (USD8.01) apiece. APA's board of directors backed the acquisition.
APA's shares [ASX: APA] slumped today by almost 10 percent to AUD8.57 (USD6.25).
Australia's electricity and natural gas assets have appealed to foreign investors for a while, including CK Group. Australia's antitrust regulator Australian Competition and Consumer Commission did not reject CK Group's acquisition of APA Group since CK had pledged to divest all of APA's pipeline assets in western Australia.
But the ACCC did not consider the concentration of foreign ownership, Frydenberg said.