AusNet Services (ASX: AST) has conditionally accepted an acquisition offer from a Brookfield-led consortium that values the Victorian electricity and gas distribution company at an enterprise value of $17.8 billion and an equity value of $10.2 billion.
The deal will transfer the AusNet assets from shareholders in an ASX-listed company to one of the world’s largest asset managers, several Canadian pension fund managers and a single Australian superannuation fund.
In addition to Toronto-based Brookfield Asset Management (NYSE: BAM), members of the acquisition consortium are Canadian pension and endowment managers Alberta Investment Management Corporation (AIMCo), Investment Management Corporation of Ontario (IMCO) and Healthcare of Ontario Pension Plan (HOOPP), plus Australian superannuation fund Sunsuper.
AusNet announced on 1 November that it had agreed the terms of a binding proposal and had entered into a scheme implementation deed under which Brookfield would acquire all its shares for $2.65 cash per share. The price represents a 34% premium to the $1.98 closing price for AusNet shares on 17 September.
Members of the AusNet board have unanimously recommended that shareholders vote in favour of the scheme in the absence of a superior proposal and subject to an independent expert concluding the scheme is in the best interests of shareholders.
AusNet was required to cease discussions with other parties under the terms of the scheme implementation deed and terminated due diligence it had recently provided to gas pipelines company APA (ASX: APA). APA had made a most recent indicative cash and scrip proposal of $2.54 per share.
AusNet noted that APA was still free to make a superior proposal and that its board would be free to consider this under the terms of the scheme implementation deed with Brookfield.
Brookfield made an initial unsolicited, indicative, non-binding and conditional offer on 30 August at $2.35 per share. Announcing that offer, AusNet said its board had considered it in the best interests of shareholders to seek a firm offer of $2.50 and had therefore granted Brookfield exclusive due diligence.
AusNet said it had received an initial unsolicited indicative proposal from APA on 1 September with a notional value of $2.32 to be paid in cash and APA shares. On 21 September, APA had revised its indicative proposal to a notional value of $2.60 per share.
Following a decision and final orders made by the Takeovers Panel, AusNet had granted APA due diligence on 23 October.
AusNet will be required to pay Brookfield a break fee of more than $101 million (1% of the equity value implied by the binding offer) if the AusNet board ultimately recommends a competing superior proposal.
Singapore Power, which holds 32.74% of AusNet, had confirmed that it supports acceptance of the Brookfield scheme, AusNet said.
AusNet chairman Peter Mason said: “for the last several weeks the board has been extremely focused on ensuring a competitive process. This has resulted in a binding proposal from Brookfield at a price that provides full value to all AusNet shareholders. The binding proposal, secured at a significant premium to where the share price was trading prior to the first of the six proposals received, deserves to be put before our shareholders for their consideration.
“The board believes that the agreed scheme value appropriately reflects AusNet’s stable, growing and diversified portfolio of high quality regulated and contracted assets as well as the strong growth prospects that it is well positioned to pursue.”
APA appears unlikely to make a further bid. In a 1 November ASX announcement, the company noted that AusNet had agreed to a binding proposal with Brookfield.
The company said: “APA submitted a non-binding indicative offer for AusNet on 21 September and was granted due diligence last week, following a decision by the Takeovers Panel that a ‘no talk’ exclusivity arrangement with Brookfield agreed between AusNet and Brookfield be made subject to a ‘fuiduciary out’.
“APA still considers the AusNet business to be highly attractive. While APA has received strong support from investors in both AusNet and APA Group for its proposed acquisition, APA will continue to remain financially disciplined.”
AusNet received legal advice on the proposals from Allens.