Australia's Hastings gets $1.25 billion offer trumping APA

SYDNEY Tue May 15, 2012 3:15am EDT

SYDNEY (Reuters) - Australian gas pipeline owner Hastings Diversified Utilities Fund HDF.AX received a $1.25 billion takeover offer from a consortium including a Canadian fund manager On Tuesday, setting up a bidding war against APA Group (APA.AX).

Hastings shares jumped 13 percent to close at A$2.38. That was slightly higher than the new offer at A$2.35 a share, suggesting investors doubted APA would come up with a much better offer.

"That's a hefty premium," said Jason Teh, a portfolio manager at Investors Mutual, which recently sold its holding in APA Group. "Now it really comes down to how badly they want it."

APA left its options open on Tuesday, extending its A$1.1 billion ($1.1 billion) hostile bid by two months to July 31 and saying it would review the rival offer from Pipeline Partners Australia.

At stake is HDF's Southwest Queensland Pipeline which connects Queensland with all the eastern Australian gas markets through Moomba in South Australia, with strong growth prospects from new coal seam gas projects and huge liquefied natural gas export projects in Queensland.

"Everybody wants that Southwest Queensland Pipeline....Pipelines that interconnect markets tend to be trophy assets," said Investors Mutual's Teh.

APA's bid has been held up by Australia's competition watchdog. It is expected to rule in June on APA's bid, after the company promised to sell one of HDF's other pipelines in South Australia to ease competition concerns.

The rival offer of A$2.35 per share, or A$1.246 billion, on Tuesday came from Pipeline Partners Australia, a consortium including fund manager Caisse de depot et placement du Quebec (CDPQ) and Utilities Trust of Australia, a fund managed by HDF's manager Hastings Funds Management.

That trumped APA's offer of A$0.50 cash and 0.326 APA shares for each Hastings share, worth A$2.11 a share based on APA's closing share price on Tuesday. HDF rejected the bid last December.

Hastings has struggled to lure a higher bid as APA has a blocking stake.

Pipeline Partners' bid is conditional on receiving at least 70 percent support.

The consortium has been granted due diligence for a period of up to 45 days.

HDF sought to reassure shareholders that there was no conflict of interest with the new bidder, saying all the Hastings units were being advised separately.

"Hastings continues to apply rigorous corporate governance procedures and has put in place appropriate information barriers to protect the interests of all HDF securityholders," Hastings Fund Management chairman Alan Cameron said in a statement.

($1 = 1.0020 Australian dollars)

($1 = 1.0020 Australian dollars)

(Reporting by Amy Pyett and Sonali Paul; Editing by Eric Meijer)

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