Rejection of CK Group's offer for APA paves way for potential IFM bid

IFM Investors is expected to make an offer for gas pipeline company APA Group, following Australia Government’s rejection of a AUD13bn (€8.3bn) bid from the Hong Kong-based CK Group.

IFM Investors, along with Canadian pension fund OMERS, is reported to have previously expressed an interest in APA but was awaiting the outcome of the CK bid before making its move.

Australia’s treasurer, Josh Frydenberg, has officially informed a bidding consortium led by CK Asset Holdings of his “preliminary” view that its proposed acquisition of APA would be contrary to Australia’s national interests.

Frydenberg noted that the APA was a unique company, widely held among investors with significant Australian ownership and management.

APA counts Australia’s industry super fund, UniSuper, as its single largest shareholder.

It is by far the largest gas transmission system owner in Australia with its 15,000km of pipelines representing 56% Australia’s gas pipeline transmission system, including 74% of New South Wales and 64% of Victorian pipelines, Frydenberg said.

“My preliminary view reflects the size and significance of APA Group,” he said. “It is about the extent to which the proposal is consistent with Australia’s national interest.

“The application of our foreign investment policy expressed through my preliminary view is not discriminatory against any investor or country.”

Frydenberg said his view was not an adverse reflection on CK Group or individual companies.

CK Group companies were already substantial investors in Australia’s gas and electricity sectors, and a significant provider of infrastructure services that millions of Australians relied upon, he said.

The government’s decision follows public debate and consideration within government about potential national risks arising from China’s influence over Hong Kong, where CK Group is based.

CK Group had offered AUD11 for each APA share. APA’s share price closed 8% lower at AUD8.685 a share following Frydenberg’s statement.

Sources said IFM Investors would baulk at the AUD13bn price tag but, given the level of APA’s share price now, it had room to make a lower bid while still offering a premium to shareholders.

Because it is owned by Australian industry super funds, IFM Investors would not run into regulatory hurdles, the sources said.

It is yet unknown if CK Group would team up with other Australian groups to make a revised bid for APA.