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.

Event-Driven

<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

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<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

<div>
<p>This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.</p>
</div>
<div>
<p>I number 38, mostly firm, deals around the region.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.


I number 38, mostly firm, deals around the region.


More below the fold.


Asia-Pac Weekly Risk Arb Summary: AusNet Services, Sembcorp Marine, Roxy Pacific

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Sandfire Resources Limited / Event-Driven

<p>On 23 September pre-market open, <a href="https://www.smartkarma.com/entities/sandfire-resources-limited" target="_blank" data-smartkarma-citation="entities:1259:1" rel="noopener">Sandfire Resources Limited (SFR AU)</a> requested for a trading halt. A short time later, the company announced the acquisition of the MATSA mining complex from Mubadala and Trafigura for US$1.865bn (A$2.572bn).</p><p>The acquisition is expected to be completed in the March 2022 quarter and is subject to Spanish Foreign Direct Investment Approval and anti-trust merger control approval.</p><p>The acquisition will be funded by an A$120m strategic placement to AustralianSuper, a A$165m institutional placement, a A$963m fully underwritten 1 for 1 accelerated non-renounceable entitlement offer (ANREO), debt and cash on hand.</p><p>Just over 231m shares will be issued at A$5.40/share, a 13.2% discount to the last close of A$6.22/share, and a 6.2% discount to TERP.</p><p>The increase in market cap as a result of the placement and entitlement offer will result in <a href="https://www.smartkarma.com/entities/sandfire-resources-limited" target="_blank" data-smartkarma-citation="entities:1259:1" rel="noopener">Sandfire Resources Limited (SFR AU)</a> becoming a high probability inclusion to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> at the December rebalance.</p><p>With a number of M&amp;A deals targeting <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> constituents, there will be more changes to the index over the next couple of regular rebalances (and in the interim as well).</p>

On 23 September pre-market open, Sandfire Resources Limited (SFR AU) requested for a trading halt. A short time later, the company announced the acquisition of the MATSA mining complex from Mubadala and Trafigura for US$1.865bn (A$2.572bn).The acquisition is expected to be completed in the March 2022 quarter and is subject to Spanish Foreign Direct Investment Approval and anti-trust merger control approval.The acquisition will be funded by an A$120m strategic placement to AustralianSuper, a A$165m institutional placement, a A$963m fully underwritten 1 for 1 accelerated non-renounceable entitlement offer (ANREO), debt and cash on hand.Just over 231m shares will be issued at A$5.40/share, a 13.2% discount to the last close of A$6.22/share, and a 6.2% discount to TERP.The increase in market cap as a result of the placement and entitlement offer will result in Sandfire Resources Limited (SFR AU) becoming a high probability inclusion to the S&amp;P/ASX 200 (AS51 INDEX) at the December rebalance.With a number of M&amp;A deals targeting S&amp;P/ASX 200 (AS51 INDEX) constituents, there will be more changes to the index over the next couple of regular rebalances (and in the interim as well).

Sandfire Resources (SFR AU): Acquisition, ANREO and ASX200 Inclusion

Australia

AusNet Services is an energy delivery service provider. The Company engages in electricity distribution and transmission, and owns gas distribution assets in Victoria, Australia.

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Ausnet Services (AST AU)

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

Asia-Pac Weekly Risk Arb Summary: AusNet Services, Sembcorp Marine, Roxy Pacific

This insight provides a summary of gross/annualised spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and...

David Blennerhassett

Sandfire Resources (SFR AU): Acquisition, ANREO and ASX200 Inclusion

Sandfire Resources is buying the MATSA mine in Spain and conducting a placement and entitlement offer to raise funds. This will lead to a big jump...

Brian Freitas

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