Canadian PE Fund Brookfield Offers $9.6 B to Take Over AusNet

Update: ASX-listed energy infrastructure firm APA Group has launched a rival $10 billion takeover offer for the utility business

Australian energy company AusNet Services has received a proposal, worth $9.6 billion, from the infrastructure affiliate of Brookfield Asset Management to acquire all of the issued shares in AusNet at an indicative price of $2.50 cash per share, to be reduced to the extent that AusNet pays or declares a dividend to its shareholders prior to the implementation of the proposed transaction.

The proposal was made on behalf of an open-ended infrastructure fund managed by Brookfield. AusNet owns and operates the bulk of Victoria’s transmission network infrastructure, as well as a large proportion of the state’s electricity and gas distribution network.

Brookfield reached $20-billion investment milestone in India in January this year. Of the $20 billion that Brookfield has invested in India over the past decade, around $7 billion went into real estate, as the firm placed large bets on acquiring assets of property developers.

In 2020 alone, the Canadian investor pumped in nearly $11.5 billion. This included the Reliance Jio Infratel Pvt. Ltd acquisition along with its partners and Singapore’s GIC Pte Ltd for an investment value of $7.6 billion.

Brookfield’s current indicative proposal received by AusNet follows the receipt of an indicative, non-binding and conditional proposal from Brookfield on 30 August 2021 at an indicative price of $2.351 cash and a subsequent revised proposal at an indicative price of $2.451 cash per AusNet share.

The indicative offer price of $2.501 cash per share represents a premium of:

• 26% to AusNet’s closing price on 17 September 2021 of $1.98
• 28% to the 30 day volume weighted average price of AusNet shares prior to 17 September 2021 of $1.95
• 35% to the 90 day volume weighted average price of AusNet shares prior to 17 September 2021 of $1.85

The Indicative Proposal is subject to several conditions, including due diligence, FIRB approval, unanimous support and recommendation by the Board of AusNet, and execution of a scheme implementation deed, said AusNet.

“Following careful consideration, and consultation with its advisers, the Board of AusNet considers that it is in the best interests of AusNet’s shareholders to engage further with Brookfield on the Indicative Proposal,” said the company. Accordingly, AusNet has decided to provide Brookfield with the opportunity to conduct due diligence on an exclusive basis to enable it to put forward a binding offer.

To this end, AusNet and Brookfield have entered into a confidentiality deed which provides for Brookfield to conduct due diligence and for the parties to negotiate a scheme implementation deed on an exclusive basis. Either party may terminate the exclusivity arrangements by giving the other 7 days’ written notice. No such notice may be given earlier than 7 weeks from today.

“Should Brookfield make a binding offer at $2.501 per share then, subject to the parties entering into a binding scheme implementation deed on terms and conditions acceptable to AusNet, it is the AusNet Board’s current intention to unanimously recommend that shareholders vote in favour of the proposal in the absence of a superior proposal and subject to an independent expert concluding that the proposed transaction is in the best interests of AusNet shareholders. AusNet has conveyed the terms of the proposal to the two major shareholders, Singapore Power and State Grid,” said AusNet.

The Board of AusNet has noted that there is no certainty that the Indicative Proposal, or the provision of access to Brookfield to conduct due diligence, will result in a binding offer for AusNet or result in the entry into a scheme implementation deed.
AusNet has strong stand-alone growth prospects that it is well positioned to pursue. As the owner and operator of 100% of its assets, AusNet has a diversified portfolio with a regulated and contracted asset base of over $11bn. As the incumbent primary Victorian Transmission network owner, AusNet is uniquely positioned for growth as the energy transition accelerates driven by decarbonisation.

“AusNet will continue to keep the market informed, in accordance with its continuous disclosure obligations. In the meantime, shareholders do not need to take any action in relation to the Indicative Proposal received from Brookfield,” said AusNet.

AusNet is being advised by Adara Partners and Citi as financial advisers, and by Allens as legal adviser.