Naturally shares in Duet Group jumped yesterday after it confirmed it “recently” received an unsolicited bid from Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings (CKI).
DUET said in a statement to the ASX that CKI was offering $A3 in cash per stapled security, valuing the company at $A7.3 billion ($US5.4 billion). That was a 27% premium to the closing price last Friday of $2.35. With debt of $A6.2 billion, Duet has an enterprise value of $A13.5 billion.
Duet management advised securityholders to take no action “as there is no guarantee the Proposal will proceed further.” Shares jumped 15.6% to $A2.74 at the close, but had been up 20% to $A2.82 in early trading.
The reason the shares have not reached ot topped the $3 level is the fact that there are a couple of obstacles – Duet’s board has to decide if the bid is serious and if it CKI given due diligence granted.
That’s not a given seeing Duet has spent the past year expanding here and offshore, especially through the $A1.4 billion takeover of Energy Developments which gives it entre into the renewables business.
It is also in the process of restructuring its debt with its lenders to extend maturities past 2017 and 2018.
The bid needs Foreign Investment Board approval, which is its biggest hurdle given the CKI was kicked back earlier this year as one of two short listed bidders for the Ausgrid poles and wires assets in NSW which eventually was sold to the two big industry funds for more than $A16 billion.
CKI and China Grid, a state owned power infrastructure group were rejected as bidders for Ausgrid’s assets on national security grounds and local invest0rs are wary of that obstacle being re-erected by the Federal Government.
A final hurdle is the competition regulator, the ACCC because of CKI’s already solid suite of energy related assets in Australia.
CKI already has investments in SA Power Networks, Powercor Australia and Australian Gas Networks among others. Other bidders might appear but the national security and competition obstacles might prove too much for some of the other rumoured bidders including china Grid and Singapore Power.
