Monday, February 24, 2020
Martin Hennecke

Victor Li steps up with A$13b bid for gas giant in Australia
Victor Li, who succeeded his billionaire father last month as head of the CK group of companies, began his tenure with an A$13 billion bid for Australian gas pipeline operator APA Group, the Hong Kong-based conglomerate's biggest overseas acquisition. The cash offer, split among CK Asset Holdings (1113), CK Infrastructure Holdings (1038) and Power Assets Holdings (0006), was 33 percent higher than APA's closing price on Tuesday. APA shares closed 21 percent higher in Sydney at A$10, a record gain but shy of the A$11-a-share bid. CK Asset dropped 0.82 percent yesterday, CK Infrastructure slid 0.25 percent and Power Assets rose 0.27 percent. APA group has given CK access to its accounts following the bid. The purchase would give Li a company that delivers about half of the nation's gas and add to an Australian portfolio that already includes power distributor Duet Group. APA also fits the mold of utility or infrastructure firms - those generating stable cash flows - that CK companies have been targeting in the run-up to billionaire Li Ka-shing's handover to his eldest son, indicating the group's penchant for safe assets will persist under the younger Li. "This will be the first big deal after Victor took over the group," said Linus Yip, strategist at First Shanghai Securities Ltd. "If the deal is handled smoothly, Victor will be able to further prove himself internally and to investors." The deal would also represent more opportunity to diversify away from Britain, the CK empire's biggest market, amid uncertainties tied to the country's looming separation from the European Union. The purchase of APA, whose pipelines span every state and territory in mainland Australia, is subject to regulatory approvals. The Foreign Investment Review Board will examine the deal as Australia struggles to ensure natural gas supplies. Australia has encountered blackouts and rising energy costs amid a bungled transition away from coal that has left consumers with some of the highest power prices in the world. To help smooth the process this time, bidders have already held talks with the board and the anti-trust regulator and offered to sell some assets including APA's interests in the Goldfields Gas Pipeline, Parmelia Gas Pipeline and the Mondarra Gas Storage Facility in Western Australia. Meanwhile, the purchase would likely deliver synergies with CK's existing operations across the nation, such as Australia Gas Networks and the Dampier to Bunbury pipeline, says Daiwa Securities Group analyst Dennis Ip.

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