Li Ka-shing’s Cheung Kong Infrastructure makes $7.3 billion offer for Duet Group
A company led by Asia’s second-richest man Li Ka-shing has made a $7.3 billion bid for infrastructure owner Duet Group, just four months after the Turnbull government blocked the purchase of NSW’s poles and wires business by the same group.
Duet Group is expected on Monday to confirm receipt of a takeover offer from Cheung Kong Infrastructure, according to market sources.
Cheung Kong Infrastructure is offering $3 per share for Duet Group in a deal that values the company at $7.5 billion.
The offer represents a 27 per cent premium to the company’s closing price on Friday of $2.35.
Sources told Business Day the board of Duet Group received the offer late last week.
The offer is incomplete and only indicative, the sources said.
The board, led by chairman Doug Halley, will now have to weigh up the offer and decide whether to allow Cheung Kong Infrastructure to conduct due diligence.
Duet Group will also need to win the backing of its shareholders, which includes $55 billion industry super behemoth Unisuper with a 16 per cent stake. Lazard, Blackstone and Vanguard are also shareholders in the company.
The deal will be subject to approval by the Foreign Investment Review Board.
If successful, the deal will see Cheung Kong Infrastructure add to its suite of major energy infrastructure assets around Australia.
Duet Group owns Multinet Gas, one of three Victorian gas distribution networks, and two-thirds of Victorian-based electricity distributor United Energy.
It also owns the Dampier Bunbury Pipeline, a major natural gas transmission pipeline in Western Australia.
Duet’s other assets include DBP Development Group which builds, owns and operates pipelines and Energy Developments, an international group that provides clean energy and remote energy solutions.
Cheung Kong Infrastructure already owns several major infrastructure assets in Australia, including a controlling stake in South Australian electricity distributor ETSA.
Cheung Kong Infrastructure and another company linked to Mr Li, Power Asset Holdings, own CHEDHA Holdings which in turn holds Citipower and Powercor.
Hailing from Hong Kong, Mr Li is a self-made billionaire and the 20th richest person in the world with a fortune estimated at $43 billion.
Cheung Kong Infrastructure, which is listed in Hong Kong, was shortlisted as a bidder for the long-term lease of Ausgrid earlier this year.
Chinese government-owned China State Grid Corporation was also shortlisted as a bidder.
However, the federal government knocked back the bidders due to national security concerns about a China state-owned company owning the vital infrastructure.
Mr Li’s Cheung Kong Infrastructure is not state-owned but the Turnbull government had concerns about his links to senior government officials in China, a view that was widely criticised in business circles.
The stake in Ausgrid was later purchased by AustralianSuper and IFM Investors for $16.2 billion.
During 2016, Duet completed two capital raisings totalling $1.88 billion.
It used the raisings to fund the acquisition of Energy Developments for $1.4 billion and the remaining 20 per cent of the Dampier Bunbury Pipeline it did not already own.
Duet posted a 307 per cent leap in net profit attributable to stapled securityholders to $195.8 million in 2016 underpinned from earnings from the newly acquired business.
Duet Group has enlisted Macquarie Group to advise on the defence of the offer, while Morgan Stanley is assisting Cheung Kong Infrastructure.