Li Ka-Shing Wins $2.2 Billion Envestra Deal as APA Cashes In

Aug 07, 2014 2:20 am ET

(Updates to add closing share prices in seventh paragraph.)

Aug. 7 (Bloomberg) -- Billionaire Li Ka-Shing’s Cheung Kong Group won a contest to buy Envestra Ltd., after a rival bidder for the Australian gas distributor said it would sell its shares in support of the A$2.4 billion ($2.2 billion) bid.

APA Group, which owns about a third of Envestra, will support the offer of A$1.32 a share from the group that includes Cheung Kong Infrastructure Holdings Ltd., the Sydney-based company said today in a statement. APA said it will use the A$430 million in pretax profit from the sale to fund expansion over the next 12 to 18 months.

“The cash offer put forward by the consortium well exceeded our valuation of the Envestra business, even at full ownership,” APA Managing Director Mick McCormack said in the statement. “Selling out of this investment and redeploying the proceeds in other opportunities will provide better longer-term value for APA security holders.”

APA’s shares will take Cheung Kong’s stake past the 50 percent minimum required. Cheung Kong had increased its holding in Envestra to more than 39 percent before APA said it would cash in its shares, according to a statement earlier today.

The purchase gives Cheung Kong 23,000 kilometers (14,000 miles) of Envestra’s pipelines supplying gas to customers mostly in the states of Victoria and South Australia. It comes after Li almost doubled the size of his U.K. gas transmission business in 2012, with the 645 million pound ($1.1 billion) purchase of Wales & West Utilities Ltd.

Envestra’s independent directors in May recommended Cheung Kong’s cash bid for the company over APA’s proposal to buy the company either via stock or a combination of cash and stock.

Envestra shares rose 2.7 percent to close at A$1.315 in Sydney trading, just shy of the offer price, while APA shares declined 0.4 percent to A$7.36.

The Cheung Kong consortium said in a separate statement that its offer will close Aug. 21. Cheung Kong Infrastructure shares were up 1.1 percent at HK$55.70 in Hong Kong at 2:14 p.m. local time.