APACD APA Group

By Robb M. Stewart 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 14, 2018).

MELBOURNE, Australia -- Victor Li, the new chairman of Hong Kong's CK Infrastructure Holdings Ltd., moved to expand the empire built by his billionaire father, Li Ka-shing, by offering more than $9 billion for Australian pipeline operator APA Group.

The elder Mr. Li was known to be a fan of buying assets that offered stable returns and the APA bid shows the younger Mr. Li is continuing that strategy. It also demonstrates that Victor Li is committed to expanding an empire that includes ports and property businesses in China, electric utilities in Australia and mobile phone networks in the U.K. Li Ka-shing retired last month.

But the APA bid could face opposition from Australian lawmakers and regulators. In 2016, the government blocked a deal to buy a majority stake in Ausgrid, an electricity network, on national security grounds. The purchase was sought by State Grid Corp. of China and CK Infrastructure, which was then called Cheung Kong Infrastructure.

APA operates more than 9,000 miles of gas pipelines in Australia. It also owns or has interests in gas-storage facilities, gas-fired power stations and wind farms. Its portfolio of assets is valued at more than $15 billion.

On Wednesday, APA said it would open its books to a CKI-led consortium after receiving a conditional offer worth 11 Australian dollars (US$8.33) a share in cash. APA left the door open to other bidders.

A formal offer would need approval from Australia's antitrust regulator and the Foreign Investment Review Board.

The CKI offer came at a 33% premium to APA's Tuesday closing price. It values APA at more than $9.3 billion.

The APA bid comes at a challenging time for the Li family's CK Hutchison Holdings Ltd. conglomerate, which owns a majority stake in CKI.

Chinese competitors are eating away at its port and property businesses in Hong Kong and mainland China, while regulators have blocked bids worth more than $10 billion for a mobile phone operator in the U.K. Political uncertainty in the U.K. also poses a risk to CK Hutchison as more than a third of its operating profit comes from there.

CKI is one of the largest foreign investors in Australian infrastructure. It owns SA Power Networks, an electricity distributor in South Australia state, Melbourne electricity supplier CitiPower, gas distributor Australian Gas Networks Ltd. and an electricity distributor and a renewable-energy transmission business in Victoria state.

Last year, the government in Canberra didn't block CKI's takeover of utility Duet Group, which was worth about $5.5 billion.

APA said the CKI-led group indicated it is in talks with Australian regulators and has proposed selling a package of assets and creating a stand-alone management team.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

June 14, 2018 02:47 ET (06:47 GMT)

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