SYDNEY, March 5 (Reuters) - Hong Kong investment firm Cheung Kong Infrastructure Holdings Ltd may block Australian gas transporter APA Group's A$2.06 billion ($1.84 billion) takeover of smaller rival Envestra Ltd, two people with knowledge of the matter told Reuters.
In a statement to the Australian Stock Exchange on Tuesday, Envestra said it recommended the takeover but added that two of its directors, CKI Chief Financial Officer Dominic Chan and CKI Chief Planning and Investment Officer Ivan Chan, "do not consider the Scheme to be in the best interests of Envestra shareholders".
The CKI executives did not say why they oppose the sale but they must explain their position in a scheme booklet Envestra plans to send to shareholders in the next three weeks, said the sources who declined to be named because they were not authorised to speak about the deal.
The CKI executives may not oppose the sale outright and may demand a higher price, the sources said. CKI executives could not immediately be reached for comment.
An unravelling of the deal would be a surprise blow to APA, which distributes about half Australia's gas and wants to broaden its reach. In 2012, it paid A$1.4 billion for Hastings Diversified Utilities Fund.
CKI holds a 17.46 percent stake of Envestra, according to Reuters data. For the deal to go ahead, more than 75 percent of non-APA shareholders must support the sale. CKI's holding amounts to about 26 percent of non-APA shares, which means its approval is necessary.
In its statement, Envestra said it asked CKI how it would vote but "CKI has advised Envestra that it does not currently intend to make a public statement regarding its voting intentions".
Envestra shares were trading around 3 percent higher on Wednesday, having fallen sharply on Tuesday on fears the deal may not proceed. APA shares were flat at A$6.57.
Envestra plans to ask shareholders to vote on the deal in May. ($1 = 1.1176 Australian dollars) (Reporting By Byron Kaye; Editing by Miral Fahmy)