* Gas pipe operator scraps support for rival all-share bid
* Rival suitor APA considers options, owns third of Envestra
* Li firms expanding into higher-growth regions
(Adds APA and analyst comment, detail on competing bids)
By Byron Kaye
SYDNEY, May 30 Australian gas pipeline owner
Envestra Ltd backed a A$2.37 billion ($2.20 billion)
cash takeover bid from firms linked to Hong Kong tycoon Li
Ka-shing, a deal that would give Asia's richest man control of a
lucrative infrastructure asset.
Envestra's move on Friday scraps previous support for a
lower, share-swap offer from domestic rival Australian Pipeline
Ltd, which owns about a third of the target. The cash
offer by Li and his Cheung Kong Group (CKI) is the
latest in a string of deals to expand into regions offering
higher growth and returns than their Hong Kong base.
In a statement to the Australian Securities Exchange,
Envestra said its chairman and an independent board committee
now unanimously recommended the CKI offer and would withdraw
their support for the APA all-stock offer, worth about A$2.20
Envestra had recommended APA's bid for about two months but
companies related to CKI - Envestra's biggest shareholder after
APA - opposed the move before unexpectedly submitting a higher
cash offer on May 9.
"We will consider our options," an APA spokesman said.
Analysts said that the CKI offer gives APA the chance to
sell its Envestra stake at a substantial profit.
"APA can't be too unhappy with this because they bought this
Envestra stake pretty cheaply," said Morningstar analyst Adrian
Atkins, adding APA bought many of its Envestra shares in a
30-cent rights issue, compared to CKI's cash offer of A$1.32 per
APA would struggle to block the CKI bid since, even though
it has a third of Envestra's shares, CKI's offer is conditional
only on getting 50 percent approval. A higher offer from APA
would likely be blocked by CKI.
An acquisition by the Hong Kong group would be a welcome
victory for CKI after it missed out on another prized Australian
asset, the world's biggest coal terminal, Port of Newcastle, a
month ago. The government of New South Wales state sold the
asset to China Merchants Group Ltd for A$1.75
Envestra shares were up one percent at A$1.367 and APA
shares were up 0.5 percent at A$6.925 02.02 GMT. Australian
stocks were broadly flat.
($1 = 1.0766 Australian Dollars)
(Reporting by Byron Kaye; Editing by Stephen Coates and Kenneth