AusNet (ASX:AST) in the middle of bidding war; what makes electricity distributor so attractive

Image Source: ©Pilarin | Megapixl.com

Highlights

  • Shares of AusNet Services closed nearly 10% higher on Tuesday.
  • AusNet was the top performer on the ASX charts Tuesday after it resumed trading from a halt.
  • The surge in stock price was after a takeover bid from APA Group and Brookfield.

Shares of AusNet Services Ltd (ASX:AST) are on a roll. The stock of the energy company rocketed 20% in the opening trade on Tuesday and closed nearly 10% higher after a takeover bid from APA Group. AusNet was the top performer on the ASX charts Tuesday after it resumed trading from a halt. On Monday, Brookfield Asset Management proposed a non-binding offer to acquire all its issued shares worth AU$2.50 a share.

The latest surge in stock prices of the electricity distributor comes after a challenging year so far. The stock has delivered a return of 13% since 1 January 2021. In the past 12 months, the stock has surged just 6.5%. The returns are weak compared to the ASX 200’s gains of nearly 25% in the past year.

What happened so far

The ongoing bidding war between APA Group and Brookfield Asset Management started on Monday when the latter made a non-binding offer to acquire the company. The offer was made at a 26% premium to AusNet’s closing price of AU$1.98 on Friday. It is at a 35% premium to its 30-day weighted average share price. AusNet decided to provide Brookfield with an opportunity to conduct exclusive due diligence.

The following day rival electricity distributor APA Group (ASX:APA) came up with its bidding offer. APA made a non-binding proposal via a scheme of arrangement for AU$2.60 per share in cash and scrip.

Image Source: © Arrow | Megapixl.com

What makes AusNet so attractive for bidders

The revised proposal from Brookfield was on behalf of an infrastructure fund that it manages. It has already made two previous conditional proposals. The first offer for AU$2.35 per share was on 30 August and the subsequent was for AU$2.45 per share.

Brookfield seems to be eyeing AusNet’s AU$11 billion of 100%-owned-and-operated assets. These assets can find their way into its diversified infrastructure portfolio.

On the other hand, APA Group aims to create an Australian company with the scale and potential to boost an AU$20-billion growth in electricity transmission infrastructure, which is required to aid the decarbonisation of the country’s economy.

Commenting on the opportunity, APA’s CEO, Rob Wheals, said: “Unlike many OECD countries, Australia lacks a locally owned and controlled energy utility with capabilities across critical energy infrastructure and with the size and strength to partner with government and the community to deliver the energy transition.”

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