Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

HK Type 4 license through Ballingal Investment Advisors Ltd. 

I'm a highly experienced sell-side analyst with in excess of 22 years of covering Asia Pacific equities, the past 19 years immersed in event strategies encompassing M&A risk arbitrage, directional long/short, stub trades and restructuring.  

My background also includes accountancy (liquidation/bankruptcy/receivership) earlier in my career and as a chief financial officer of a global commodity company based in the US and Mexico.

Pan-Asia Catalysts/Events

AusNet (AST AU): ACCC Commences Informal Review

AusNet (AST AU) Enters Scheme With Brookfield

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

AusNet Services (AST AU): Spurned APA Trumps Brookfield's Proposal

AusNet Services (AST AU) Opens Its Books to Brookfield

Quiddity Advisors

Event-Driven

<div>
You get the impression <a href="https://www.smartkarma.com/entities/apa-group" target="_blank" data-smartkarma-citation="entities:18658:1" rel="noopener">APA Group (APA AU)</a> is a tad late to the party. Not that they still can't join in the fun - but only after the hors d'oeuvres and apéritifs have been consumed.
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. Concurrently, APA had approached AusNet with a non-binding proposal of A$2.32 on the 1 September, and that APA had made AusNet aware last Thursday (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.
APA subsequently <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> a "superior proposal" on the 21 September, involving a non-binding indicative Offer by way of a Scheme for A$2.60/share in cash and scrip.
AusNet's board <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02424119_PS-3A576346?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">concluded</a> APA's Proposal was:
<blockquote>
inferior in respect of price, form of consideration, structure and certainty, and that it was in the best interests of AusNet shareholders to engage with Brookfield on its proposal.
</blockquote>
APA proceeded to lodge 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 yesterday, such that:
<blockquote>
The exclusivity arrangements (with Brookfield) prevent AusNet “from responding to a superior proposal provided by APA to acquire all of the issued shares of [AusNet] at an indicative value of $2.60 per [AusNet] share”; and that
The circumstances (including the entry into the confidentiality deed with Brookfield) “hinder, or are likely to hinder, the acquisition of control of [AusNet] taking place in an efficient, competitive and informed market, contrary to section 602(a) and deny, or are likely to deny, [AusNet] shareholders an opportunity to participate in the benefits of a proposal contrary to section 602(c)”.
</blockquote>
APA is seeking final orders including that the exclusivity arrangements “be terminated" to permit AusNet to respond to APA’s proposal (and any other competing proposals).
Today, APA issued a presentation deck further expounding its superior proposal. <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> summarises the "superiorness".
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/231/525/original/image_10447746721632445607373.png?1632445608" class="editor-image img-responsive" data-smartkarma-image-id="231525"></figure>
APA's headline Offer price is clearly superior, although this is subject to fluctuations in APA's share price. The Offer consideration  - using the A$1.82/0.0878 cash/scrip breakdown as per the announcements - is currently worth $2.59. It remains unknown what the caps will be on either the cash or scrip portion of the consideration. 
Not being subject to FIRB is a positive, but with AusNet already majority controlled by foreign shareholders, this is not APA's strongest argument. 
APA is locked out of negotiations, for now. I'd be surprised if the TO backs APA's submission of "unacceptable circumstances". 
</div>
<div>More below the fold.</div>


You get the impression APA Group (APA AU) is a tad late to the party. Not that they still can't join in the fun - but only after the hors d'oeuvres and apéritifs have been consumed.
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. Concurrently, APA had approached AusNet with a non-binding proposal of A$2.32 on the 1 September, and that APA had made AusNet aware last Thursday (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.
APA subsequently announced a "superior proposal" on the 21 September, involving a non-binding indicative Offer by way of a Scheme for A$2.60/share in cash and scrip.
AusNet's board concluded APA's Proposal was:

inferior in respect of price, form of consideration, structure and certainty, and that it was in the best interests of AusNet shareholders to engage with Brookfield on its proposal.

APA proceeded to lodge an application to the Takeovers Panel yesterday, such that:

The exclusivity arrangements (with Brookfield) prevent AusNet “from responding to a superior proposal provided by APA to acquire all of the issued shares of [AusNet] at an indicative value of $2.60 per [AusNet] share”; and that
The circumstances (including the entry into the confidentiality deed with Brookfield) “hinder, or are likely to hinder, the acquisition of control of [AusNet] taking place in an efficient, competitive and informed market, contrary to section 602(a) and deny, or are likely to deny, [AusNet] shareholders an opportunity to participate in the benefits of a proposal contrary to section 602(c)”.

APA is seeking final orders including that the exclusivity arrangements “be terminated" to permit AusNet to respond to APA’s proposal (and any other competing proposals).
Today, APA issued a presentation deck further expounding its superior proposal. Page 15 summarises the "superiorness".

APA's headline Offer price is clearly superior, although this is subject to fluctuations in APA's share price. The Offer consideration  - using the A$1.82/0.0878 cash/scrip breakdown as per the announcements - is currently worth $2.59. It remains unknown what the caps will be on either the cash or scrip portion of the consideration. 
Not being subject to FIRB is a positive, but with AusNet already majority controlled by foreign shareholders, this is not APA's strongest argument. 
APA is locked out of negotiations, for now. I'd be surprised if the TO backs APA's submission of "unacceptable circumstances". 

More below the fold.

AusNet (AST AU): APA Elevates Tussle With Brookfield And Taps Takeover Panel

Ausnet Services

AusNet (AST AU): APA Elevates Tussle With Brookfield And Taps Takeover Panel