Stock in Duet Group (DUE) ended up 1% at $2.80 yesterday after shareholders at three of Hong Kong billionaire, Li Ka-shing’s companies approved a joint bid of A$7.37 billion ($5.57 billion) for the Australian energy network operator.
Statements from three of Mr Lis’s companies, Cheung Kong Infrastructure Holdings (CKI), Cheung Kong Property Holdings (CKP) and Power Assets Holdings to the Hong Kong Stock Exchange on Tuesday evening showed Mr Li easily securing approval for the Duet offer first made in December.
The approval is another step towards the deal’s completion, although much still needs to happen.
While Mr Li’s bid was accepted by Duet board in January, it still requires approval from Australian regulators, and investors remain uncertain by the role of a new player in the regulatory stakes in Australia, the Turnbull Government’s Critical Infrastructure Centre.
This Turnbull government initiative is intended to assess whether any privatisation or sale to overseas investors could raise national security concerns.
So while Li Ka-shing has won the approval of shareholders in three of his companies for their combined bid for Duet Group, the eventual fate of the bid remains in the hands of the this Critical Infrastructure Centre and usual final regulator at government level the Foreign Investment Review Board.
Three of Li’s companies have offered $A7.4 billion ($US5.6 billion), for Duet. The deal has won the greenlight from the competition regulator, the ACCC. The transaction also needs approval from Duet shareholders, but that won’t come for a while.
Duet shares have jumped about 20% since Cheung Kong Infrastructre made an all-cash bid in early December. Li sweetened the offer in January by including a special dividend and split the bid among the three companies pending shareholder approvals. Those have now been given.
The Foreign Investment Review Board had been expected to make a decision by last month, but so far there has been no announcement.
Some analysts say it is the presence of the Critical Infrastructure Centre, which is causing the delay.
But all this is uncertain – the Centre is not even operational and submissions on its powers of operation not due until next Tuesday, March 21. As a result the bid could fail to make the mid-May deadline for the deal to be implemented. But ASIC will probably grant an extension because of the uncertainty in Canberra.
So far the Li group has not shown any concerns about the continuing power (especially gas) problems in Australia and especially South Australia where the Li companies already have a major presence.
Bloomberg points out that for Mr Li (one of the world’s wealthiest men) buying Duet would help reduce reliance on China and the UK. The UK is the biggest profit generator for his flagship firm CK Hutchison Holdings.
The UK’s decision to leave the EU has hurt Li’s businesses by weakening the pound and increasing uncertainty about the country’s global trade rules.
The Duet deal should actually be seen as a vote of no confidence in the future of the UK, just Li re-located the domicile of his key companies from Hong Kong to the Cayman Islands in 2015 as he was concerned about growing problems with the Chinese rule in Hong Kong.
Li’s companies already own stakes in assets including SA Power Networks, Powercor Australia, Australian Gas Networks and CitiPower I Pty Ltd.
With Duet’s assets include the Dampier-Bunbury pipeline in Western Australia, a stake in electricity distributor United Energy, gas distribution business Multinet Gas, pipelines business DBP Development Group and Energy Developments Ltd, Li’s group will become the major player in Australian domestic power.
