APA will ‘revert to Plan A’ if $13 billion deal gets blocked by FIRB

APA Group

On 25 October 2018, APA Group (ASX: APA) held its annual general meeting, in which Chairman Mr. Michael Fraser informed that if CK Group doesn’t win foreign investment approval for the company’s $13 billion takeover bid for the gas pipeline owner, the company will revert to its original Plan A of continuing with the successful growth strategy that the company has employed for almost 2 decades. Following this news, the share price of the company decreased by 1.189 percent as on 25 October 2018.

In June 2018, an unsolicited offer was put by a CKI Consortium, offering to acquire APA at a cash price of $11.00 per stapled security.  The Australian Competition and Consumer Commission (ACCC) has recently decided that it will not oppose the proposed transaction and it has accepted an undertaking from CKI to sell certain gas assets in Western Australia if the transaction goes ahead.

The matter is currently getting reviewed by the Foreign Investment Review Board (FIRB) and it will make a recommendation to the Treasurer in due course. According to the board, the offer made by the CKI Consortium is compelling as it is an all-cash offer giving certainty of value to Securityholders. If the Treasure gave the approval, the meeting of APA security holders is planned to occur early in December 2018. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

However, if Hong Kong-based suitor CK Group doesn’t win foreign investment approval, the company will revert to its original Plan A of continuing with the successful growth strategy that the company has employed for almost 2 decades. According to Mr. Michael Fraser, FY 2018 was a significant year for the company’s business as it is the first time the operating cash flow of the company has reached over a billion dollars. The EBITDA of the company increased by 3 percent to $1,518.5 million in FY 2018 compared to the corresponding previous year. The NPAT of the company increased by 11.8 percent to $264.8 million in FY 2018. The operating cash flow of the company increased by 5.9 percent to $1,031 million in FY 2018. The Distributions per security increased by 3.4 percent to 45.0 cents in FY 2018. The operating cash flow per security increased by 4.1 percent to 90.7 cents in FY 2018.

The company is expecting EBITDA for FY 2019 to be within a range of $1,550 million to $1,575 million. If the CKI proposal gets blocked by FIRB, the company will remain a stand-alone listed company for the full financial year. The distributions per security for FY 2019 are expected to be 46.5 cents per security, with additional franking credits arising from the filing of the FY 2019 tax return.

In the last six months, APA Group’s shares increased by 20.57 percent as on 24 October 2018, traded at a PE level of 41.500x. APA’s shares traded at $9.555 with a market capitalization of circa $11.41 billion as on 25 October 2018 (AEST 3:37 PM).


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