Talk is heating up of a couple of more possible bidders for Duet Group, with more media reports that China Grid and Singapore Power could be interested after Hong Kong’s Cheung Kong Infrastructure (CKI) lobbed a non-binding $7.3 billion for Duet last friday.
But analysts and some in the investment sector say CKI and other bidders will need local partners to help overcome possible competition and foreign ownership hurdles.
DUET confirmed on Monday it received an indicative, conditional offer of $3 per share from CKI. That offer represented a 27% premium to DUET’s closing price on Friday of $2.35.
Its securities rose 16.6% to close at $2.74 on Monday, but yesterday they faded a touch, dipping 1.1% to $2.71 as investors remain to be convinced the offer will happen and if it does, that it will succeed.
The board of DUET is yet to make a recommendation to security holders on the offer, which will be subject to due diligence.
Gas pipeline owner APA Group is thought to be attracted to the Dampier-Bunbury pipeline, but that might not lead to an offer from the group. But APA is already a major pipeline owner across the country and could face competition problems.
The major stumbling block for CKI’s proposal is the approval of the Foreign Investment Review Board and Treasurer Scott Morrison. In August he rejected CKI’s bid for a 54% stake in NSW poles and wires business Ausgrid due to national security concerns. China Grid was also rejected for the same reason.
The proposed sale of a 50.4% stake in Endeavour Energy by the NSW government next year (if it happens of course) requires each consortium to include an Australian entity owning 20% to obtain FIRB approval.
DUET owns the Dampier to Bunbury gas pipeline, United Energy and Multinet Gas in Victoria. The latter two in that list are seen as the most problematic assets in terms of potential national security issues. Its renewable and associated assets are also an attraction after it paid $1.4 billion for Energy Developments.
Some analysts say that infrastructure investor and industry super fund, Unisuper could sell its shares in Duet (around 16%) into the deal for a stake in the company alongside CKI. But CKI has a long history of going it alone and not investing with other groups.
Two big industry funds bailed out the NSW on the Ausgrid sale after CKI and China Grid were rejected by offering $16.2 billion for the 54% stake in the poles and wires business.
