Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>BGH has filed an <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02482688_PS-2A1354502?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">application</a> with the Takeover Panel over, inter alia, <strong><a href="https://www.smartkarma.com/entities/virtus-health-ltd" target="_blank" data-smartkarma-citation="entities:14776:1" rel="noopener">Virtus Health (VRT AU)</a></strong> granting exclusivity to CapVest.</li>
<li>This application is similar in nature to the one filed by <strong><a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a></strong> last year after <strong><a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">AusNet Services (AST AU)</a></strong> granted Brookfield exclusivity in a competitive bidding stoush.</li>
<li>Virtus is currently trading at a gross spread of ~5.0% to the Scheme price, 3.6% to the Alternative Offer, and 1.8% above BGH's terms. </li>
</ul>


BGH has filed an application with the Takeover Panel over, inter alia, Virtus Health (VRT AU) granting exclusivity to CapVest.
This application is similar in nature to the one filed by APA Group (APA AU) last year after AusNet Services (AST AU) granted Brookfield exclusivity in a competitive bidding stoush.
Virtus is currently trading at a gross spread of ~5.0% to the Scheme price, 3.6% to the Alternative Offer, and 1.8% above BGH's terms. 


BGH Lodges Application With The Takeovers Panel Over CapVest's Bid for Virtus

<ul>
<li>
<strong><a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">AusNet Services (AST AU)</a></strong>'s Scheme Booklet is now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02467964-3A583994?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">out</a>. The Offer Price is A$2.6025/share. The FY22 interim dividend of $0.0475/share has already been netted.</li>
<li>The Scheme Meeting will be held on the 28 January.  The Independent Expert has concluded the Offer is fair and reasonable.</li>
<li>The Offer price implies an EV/R&amp;CAB multiple of 1.61x and an FY22E EV/EBITDA multiple of 15.3x. The Offer consideration is at a life-time high.</li>
</ul>



AusNet Services (AST AU)'s Scheme Booklet is now out. The Offer Price is A$2.6025/share. The FY22 interim dividend of $0.0475/share has already been netted.
The Scheme Meeting will be held on the 28 January.  The Independent Expert has concluded the Offer is fair and reasonable.
The Offer price implies an EV/R&amp;CAB multiple of 1.61x and an FY22E EV/EBITDA multiple of 15.3x. The Offer consideration is at a life-time high.


AusNet (AST AU): Scheme Booklet Out. Meeting on 28 January

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<p><a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a> is a diversified Australian energy infrastructure business with over $11 billion of electricity and gas network and connection assets. AusNet has received a binding proposal and entered a scheme implementation deed (SID) with a Brookfield-led consortium. The Brookfield offer of A$2.65 cash per share is a 33.8% premium to the unaffected price of A$1.98 (17 September), a 6.0% premium to Brookfield’s previous offer of A$2.50 per share and a 4.3% premium to the implied value of <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a>’s offer of A$2.54 per share on 29 October (prior to the announcement of Brookfield’s binding offer). </p><p>As outlined in <a href="https://www.smartkarma.com/insights/ausnet-s-in-a-contested-takeover-battle-between-brookfield-and-apa" target="_blank" data-smartkarma-citation="insights:57906" rel="noopener">AusNet’s in a Contested Takeover Battle Between Brookfield and APA</a>, AusNet is the subject of a contested takeover battle. A day after AusNet first revealed a conditional, non-binding indicative offer from Brookfield for A$2.50 per share, APA lobbed a non-binding indicative offer comprising A$1.820 cash and 0.0878 stapled securities in Australian Pipeline Trust and APT Investment Trust per AusNet share. Following final orders made by the Takeovers Panel, AusNet was forced to grant APA due diligence on 23 October.   </p><p>In response to AusNet entering a SID with Brookfield, APA responded that it considers AusNet to be highly attractive but “<em>will remain financially disciplined.</em>” Due to the entry into a SID, APA’s due diligence access will be terminated. We also note that Singapore Power, a 32.74% shareholder, has expressed a preference for cash consideration and the break fee stands at A$101.7 million. AusNet states that APA has not indicated that it will be able to offer a full cash alternative or the value level at which any improvement to its offer could be made. Consequently, we think it is likely that APA will call it a day and walk away. </p><div class="content-highlight"><p>Brookfield’s offer is conditional on FIRB approval. We think that presence of Australia’s Sunsuper and Canadian pension funds in the consortium should help secure FIRB approval. At the last close price of A$2.56, AusNet’s shares are trading at a 3.5% premium to Brookfield’s cash offer of A$2.65.</p></div>

Ausnet Services (AST AU) is a diversified Australian energy infrastructure business with over $11 billion of electricity and gas network and connection assets. AusNet has received a binding proposal and entered a scheme implementation deed (SID) with a Brookfield-led consortium. The Brookfield offer of A$2.65 cash per share is a 33.8% premium to the unaffected price of A$1.98 (17 September), a 6.0% premium to Brookfield’s previous offer of A$2.50 per share and a 4.3% premium to the implied value of APA Group (APA AU)’s offer of A$2.54 per share on 29 October (prior to the announcement of Brookfield’s binding offer). As outlined in AusNet’s in a Contested Takeover Battle Between Brookfield and APA, AusNet is the subject of a contested takeover battle. A day after AusNet first revealed a conditional, non-binding indicative offer from Brookfield for A$2.50 per share, APA lobbed a non-binding indicative offer comprising A$1.820 cash and 0.0878 stapled securities in Australian Pipeline Trust and APT Investment Trust per AusNet share. Following final orders made by the Takeovers Panel, AusNet was forced to grant APA due diligence on 23 October.   In response to AusNet entering a SID with Brookfield, APA responded that it considers AusNet to be highly attractive but “will remain financially disciplined.” Due to the entry into a SID, APA’s due diligence access will be terminated. We also note that Singapore Power, a 32.74% shareholder, has expressed a preference for cash consideration and the break fee stands at A$101.7 million. AusNet states that APA has not indicated that it will be able to offer a full cash alternative or the value level at which any improvement to its offer could be made. Consequently, we think it is likely that APA will call it a day and walk away. Brookfield’s offer is conditional on FIRB approval. We think that presence of Australia’s Sunsuper and Canadian pension funds in the consortium should help secure FIRB approval. At the last close price of A$2.56, AusNet’s shares are trading at a 3.5% premium to Brookfield’s cash offer of A$2.65.

AusNet Enters into a Binding Agreement with Brookfield

<div>
<p>Since Victorian electricity operator <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">AusNet Services (AST AU)</a> <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02423286-3A576179?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it would grant Brookfield due diligence access after receiving a revised non-binding Offer of A$2.50/share, up from $2.35/share on the 30 August, there has been a knotty backdrop involving competing bidder <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a>. A rough timeline is as follows.</p>
<table class="table table-striped">
<colgroup> <col> <col> </colgroup>
<tbody>
<tr>
<td rowspan="2" style="width: 84pt;">
<h3>Date</h3>
</td>
<td rowspan="2" style="width: 323pt;">
<h3>Data in the Date</h3>
</td>
</tr>
<tr></tr>
<tr>
<td style="text-align: left; width: 84pt;">1-Sep-21</td>
<td style="width: 323pt;">APA approached AusNet with a non-binding proposal of A$2.32</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">16-Sep-21</td>
<td style="width: 323pt;">APA made AusNet aware it intended to make a revised proposal</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">20-Sep-21</td>
<td style="width: 323pt;">Brookfield's exclusive eight-week due diligence</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">21-Sep-21</td>
<td style="width: 323pt;">APA announced its "superior proposal", involving a non-binding indicative Offer by way of a Scheme for A$2.60/share in cash and scrip</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">23-Sep-21</td>
<td style="width: 323pt;">APA lodged an application to the Takeovers Panel, criticising the exclusivity arrangements with Brookfield</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">28-Sep-21</td>
<td style="width: 323pt;">APA extended the deadline to be granted due diligence for as long as the Takeovers Panel application remained under review. </td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">1-Oct-21</td>
<td style="width: 323pt;">Brookfield lodged its own Panel application contending APA's ASX announcements on the 24 and 29 September contained misleading and incorrect information</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">8-Oct-21</td>
<td style="width: 323pt;">The Panel declined to conduct proceedings wrt to Brookfield's application</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">15-Oct-21</td>
<td style="width: 323pt;">The Panel declared there were unacceptable circumstances:</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">15-Oct-21</td>
<td style="width: 323pt;">AusNet announced it would now engage with APA</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">23-Oct-21</td>
<td style="width: 323pt;">AusNet will now provide due diligence access to APA in parallel with Brookfield.</td>
</tr>
<tr>
<td style="text-align: left; width: 84pt;">28-Oct-21</td>
<td style="width: 323pt;">The ACCC commenced its review of APA's bid for AusNet. </td>
</tr>
<tr>
<td colspan="2" style="width: 407pt;"><em>Source: Various ASX announcements</em></td>
</tr>
</tbody>
</table>
</div>
<h3>The New News</h3>
<div>
<p>Brookfield has now bumped its Offer to $2.65/share, in cash, and AusNet has <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02445508-3A579944?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">entered</a> into a Scheme Implementation Deed (SID).</p>
<p>The Offer has unanimous board support. Singapore Power with 32.74% has said it would vote in favour of the Scheme. No word from China's State Grid.</p>
<p>A requirement under the SID is that AusNet cease discussions with other parties. AusNet has terminated APA's due diligence access.</p>
<p>APA is free to make a superior proposal - whose cash/scrip Offer is currently $2.54/share based on last Friday's close. </p>
<p>Brookfield is very much in the driving seat here. </p>
<p>More below the fold.</p>
<p></p>
</div>


Since Victorian electricity operator AusNet Services (AST AU) announced it would grant Brookfield due diligence access after receiving a revised non-binding Offer of A$2.50/share, up from $2.35/share on the 30 August, there has been a knotty backdrop involving competing bidder APA Group (APA AU). A rough timeline is as follows.

   



Date


Data in the Date




1-Sep-21
APA approached AusNet with a non-binding proposal of A$2.32


16-Sep-21
APA made AusNet aware it intended to make a revised proposal


20-Sep-21
Brookfield's exclusive eight-week due diligence


21-Sep-21
APA announced its "superior proposal", involving a non-binding indicative Offer by way of a Scheme for A$2.60/share in cash and scrip


23-Sep-21
APA lodged an application to the Takeovers Panel, criticising the exclusivity arrangements with Brookfield


28-Sep-21
APA extended the deadline to be granted due diligence for as long as the Takeovers Panel application remained under review. 


1-Oct-21
Brookfield lodged its own Panel application contending APA's ASX announcements on the 24 and 29 September contained misleading and incorrect information


8-Oct-21
The Panel declined to conduct proceedings wrt to Brookfield's application


15-Oct-21
The Panel declared there were unacceptable circumstances:


15-Oct-21
AusNet announced it would now engage with APA


23-Oct-21
AusNet will now provide due diligence access to APA in parallel with Brookfield.


28-Oct-21
The ACCC commenced its review of APA's bid for AusNet. 


Source: Various ASX announcements




The New News

Brookfield has now bumped its Offer to $2.65/share, in cash, and AusNet has entered into a Scheme Implementation Deed (SID).
The Offer has unanimous board support. Singapore Power with 32.74% has said it would vote in favour of the Scheme. No word from China's State Grid.
A requirement under the SID is that AusNet cease discussions with other parties. AusNet has terminated APA's due diligence access.
APA is free to make a superior proposal - whose cash/scrip Offer is currently $2.54/share based on last Friday's close. 
Brookfield is very much in the driving seat here. 
More below the fold.



AusNet (AST AU) Enters Scheme With Brookfield

<div>
<p>Back on the 20 September, Victorian electricity operator <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">AusNet Services (AST AU)</a>  <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02423286-3A576179?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it would open its books to Brookfield after receiving a revised non-binding Offer of A$2.50/share, up from $2.35/share on the 30 August.</p>
<p>It turned out that <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a> had approached AusNet with a non-binding proposal of A$2.32 on the 1 September, and that APA had made AusNet aware on 16 September it intended to make a revised proposal. AusNet opted to grant Brookfield around 8 weeks of exclusive due diligence in return for a "<em>materially increased indicative</em>" offer.</p>
</div>
<p>Undeterred,  APA <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02423895-2A1324638?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> on the 21 September its "<em>superior proposal</em>", involving a non-binding indicative Offer by way of a Scheme for A$2.60/share in cash and scrip. That superiorness was expounded in APA's presentation deck as follows:</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/238/273/original/image?1635466450" class="editor-image img-responsive" data-smartkarma-image-id="238273"></figure>
<p style="text-align: left;"><em>Source: APA's presentation deck - <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02425518-2A1325440?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">page 15</a></em></p>
<p style="text-align: left;">APA also lodged an <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02425258_PS-3A576544?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">application</a> to the Takeovers Panel on the 23 September, criticising the exclusivity arrangements with Brookfield, and sought final orders such that that the exclusivity arrangements “be terminated" to permit AusNet to respond to APA’s proposal (and any other competing proposals).</p>
<p style="text-align: left;">APA's proposal was conditional on confirmation from AusNet by the 28 September granting due diligence access. That timeline appeared overly aggressive, and not surprisingly, APA <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02427369_PS-3A576904?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">extended</a> the deadline to be granted due diligence for as long as the Takeovers Panel application remained under review. </p>
<p style="text-align: left;">Brookfield lodged its own Panel application on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02430780_PS-3A577397?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">1 October</a> that APA's ASX announcements on the 24 and 29 September contained misleading and incorrect information. The Panel <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02433414_PS-3A577836?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">declined</a> to conduct proceedings. </p>
<p style="text-align: left;">On the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02436419_PS-3A578351?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">15 October</a>, the Panel declared there were unacceptable circumstances:</p>
<blockquote>
<p style="text-align: left;">The Panel has not sought to second guess the commercial reasons of the AusNet board in pursuing the Brookfield proposal, but considered that the effect of the circumstances, in totality, are unacceptable having regard to sections 602 and 657A of the Act.</p>
</blockquote>
<p>This decision permitted AusNet to respond to APA’s proposal by the 19 October. AusNet announced on the 15 October it would now engage with APA, and that (as per the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02440134-3A579027?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">25 October announcement</a>) it will provide due diligence access to APA in parallel with Brookfield.</p>
<p><strong>The New News</strong></p>
<p>Australia's competition regulatory, the ACCC, has now <a href="https://www.accc.gov.au/public-registers/mergers-registers/public-informal-merger-reviews/apa-group-ausnet-services-ltd" target="_blank" rel="noopener">commenced i</a>ts review of APA's bid for AusNet. </p>
<p>In a similar vein to Brookfield requiring FIRB sign-off, this ACCC review was expected. But it is worth a quick look at what is being investigated.</p>
<div>
<p>More below the fold.</p>
</div>


Back on the 20 September, Victorian electricity operator AusNet Services (AST AU)  announced it would open its books to Brookfield after receiving a revised non-binding Offer of A$2.50/share, up from $2.35/share on the 30 August.
It turned out that APA Group (APA AU) had approached AusNet with a non-binding proposal of A$2.32 on the 1 September, and that APA had made AusNet aware on 16 September it intended to make a revised proposal. AusNet opted to grant Brookfield around 8 weeks of exclusive due diligence in return for a "materially increased indicative" offer.

Undeterred,  APA announced on the 21 September its "superior proposal", involving a non-binding indicative Offer by way of a Scheme for A$2.60/share in cash and scrip. That superiorness was expounded in APA's presentation deck as follows:

Source: APA's presentation deck - page 15
APA also lodged an application to the Takeovers Panel on the 23 September, criticising the exclusivity arrangements with Brookfield, and sought final orders such that that the exclusivity arrangements “be terminated" to permit AusNet to respond to APA’s proposal (and any other competing proposals).
APA's proposal was conditional on confirmation from AusNet by the 28 September granting due diligence access. That timeline appeared overly aggressive, and not surprisingly, APA extended the deadline to be granted due diligence for as long as the Takeovers Panel application remained under review. 
Brookfield lodged its own Panel application on the 1 October that APA's ASX announcements on the 24 and 29 September contained misleading and incorrect information. The Panel declined to conduct proceedings. 
On the 15 October, the Panel declared there were unacceptable circumstances:

The Panel has not sought to second guess the commercial reasons of the AusNet board in pursuing the Brookfield proposal, but considered that the effect of the circumstances, in totality, are unacceptable having regard to sections 602 and 657A of the Act.

This decision permitted AusNet to respond to APA’s proposal by the 19 October. AusNet announced on the 15 October it would now engage with APA, and that (as per the 25 October announcement) it will provide due diligence access to APA in parallel with Brookfield.
The New News
Australia's competition regulatory, the ACCC, has now commenced its review of APA's bid for AusNet. 
In a similar vein to Brookfield requiring FIRB sign-off, this ACCC review was expected. But it is worth a quick look at what is being investigated.

More below the fold.


AusNet (AST AU): ACCC Commences Informal Review

Australia

APA Group is a natural gas infrastructure company. The Company owns and or operates gas transmission and distribution assets whose pipelines span every state and territory in mainland Australia. APA Group also holds minority interests in energy infrastructure enterprises.

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APA Group (APA AU)

BGH Lodges Application With The Takeovers Panel Over CapVest's Bid for Virtus

Both proposals (BGH and CapVest's) are indicative - for now. Trading at a gross spread of ~5.0% to the Scheme price, 3.6% to the Alternative Offer,...

David Blennerhassett

AusNet (AST AU): Scheme Booklet Out. Meeting on 28 January

Trading relatively tight at gross/annualised spread of 2.7%/17%, assuming late March completion. But this appears a done deal.

David Blennerhassett

AusNet Enters into a Binding Agreement with Brookfield

AusNet has entered into a SID with a Brookfield-led consortium at A$2.65 cash per share. We think that the offer is attractive and it is likely a...

Arun George

AusNet (AST AU) Enters Scheme With Brookfield

Trading tight at gross/annualised spread of 1.9%/4.8%, assuming late March completion. I would not chase it further. I'm not entirely confident...

David Blennerhassett

AusNet (AST AU): ACCC Commences Informal Review

You have two significant players in a competitive bidding situation. Entering here at $2.47 (as I type) - below both Offers - appears a reasonable...

David Blennerhassett

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