Tycoons triumph in Australand, Envestra takeovers

Frasers Centrepoint and a Cheung Kong consortium gather sufficient acceptances to make their offers for Australand and Envestra unconditional.
Triumphant tycoon Charoen Sirivadhanabhakdi
Triumphant tycoon Charoen Sirivadhanabhakdi

Thai beer baron Charoen Sirivadhanabhakdi and Hong Kong tycoon Li Ka-shing both emerged victorious on Thursday as companies they controlled won takeover battles for Australian targets.

Singapore-listed property firm Frasers Centrepoint, which is controlled by Charoen, achieved acceptances for 56.8% of Australand, enough to make its offer unconditional.

Meanwhile, a Cheung Kong Infrastructure-led consortium’s bid for Australian gas distributor Envestra also became unconditional after rival APA group threw in the towel and tendered its entire 33% stake in Envestra, resulting in the consortium gathering acceptances of 72.8%.

Bidding wars or hostile takeovers are far more common in Australia than in Asia, where bankers have long lamented that many large Asian conglomerates are controlled by rich families who are reluctant to sell, which hinders takeovers.

Australia may be fertile hunting ground but a victory for Frasers Centrepoint was far from a forgone conclusion. As late as August 6, the day before the offer was due to lapse, only 28.6% of Australand shareholders had tendered their acceptances. This quickly rose to 46% of acceptances as of August 7, 2.30pm Australia time, but was still shy of the 50% that was needed to prevent the offer from lapsing.

Australand shares hit a 12-month high of A$4.61 on June 20, before easing to A$4.48 on August 7. Hedge funds bought heavily into the stock ahead of the offer closing. However, Frasers Centrepoint had told investors it would not sweeten its bid and that the offer would disappear if it did not receive more than 50% of the acceptances.

“The hedge funds own a lot of this, there is no reason why they should tender before today,” said one source familiar with the deal on Thursday ahead of closing. “They are buying for arbitrage but if the offer lapses they will lose money.”

In the end, the majority of investors tendered. As a result of gathering more than 50% of acceptances, Frasers Centrepoint has extended the offer period for Australand shareholders to tender until August 21.

Frasers Centrepoint first entered into a bidding war in June, when it put in a A$2.6 billion ($2.4 billion) bid for Australand. The all-cash offer of A$4.48 a share trumped an earlier bid by Stockland, Australia’s largest property group, for A$4.35 in cash and stock. Stockland’s 19.9% stake in Australand was insufficient to block it.

The deal is the second time the deep-pocketed Thai tycoon has entered a bidding war, the first time being its high-profile acquisition in 2013 of Fraser & Neave, Frasers Centrepoint’s former parent. Charoen holds a 59.4% stake in Frasers Centrepoint, which was spun off from F&N in January.

The deal reflects a continuing theme of diversification among Thai tycoons as they expand overseas amid political volatility at home.

CapitaLand, Southeast Asia’s largest developer, previously held a 39.1% stake in Australand but exited the company in March when it sold a 19.9% stake in Australand to Stockland at an average price of A$3.78 per share. It sold the remainder in a block trade at an average price of A$3.75.

Outbound SEA M&A picks up
Frasers Centrepoint’s takeover victory comes amid increasing outbound merger and acquisitions activity from Southeast Asia — with deals totalling $30.9 billion so far this year, the highest tally during the past five years.

Other recent examples of Southeast Asia countries looking overseas include Singapore agribusiness firm Wilmar and First Pacific’s bid for Australian food company Goodman Fielder. The Philippines’ Emperador also agreed to buy United Spirits’ Whyte & Mackay whisky business in May and Singapore-listed Del Monte Pacific bought the US canned foods business of Del Monte Foods last year.

Australand is one of Australia’s major property groups with a total portfolio of 68 investment properties valued at A$2.4 billion. Frasers Centrepoint entered the Australia market more than a decade ago and the deal will offer the company an opportunity to scale up.

Deutsche Bank and Standard Chartered are joint advisers to Frasers Centrepoint and are financing its bid. Sumitomo Mitsui Banking Corp is also providing the debt financing for the acquisition.

APA clears way for Envestra
Hong Kong tycoon Li Ka-shing also emerged victorious after a rival bidder APA group tendered its entire 33% stake in Envestra on Thursday.

In May, the consortium including Cheung Kong Infrastructure, Cheung Kong Holdings and Power Assets, had submitted a bid to buy Envestra in a deal that valued the latter at A$2.4 billion. Envestra’s independent directors unanimously recommended the cash offer of A$1.32, which was higher than a rival bid from APA, Envestra’s manager and largest shareholder with a 33% stake.

In a statement to the exchange on Thursday, APA managing director Mick McCormack said: “APA assessed the value proposition of the offer and concluded that selling out of this investment and redeploying the proceeds in other opportunities will provide better longer term value for APA securityholders.”

Envestra owns about 23,000 kilometres of natural gas distribution networks and 1,100km of transmission pipelines, serving over 1.2 million consumers in South Australia, Victoria, Queensland, New South Wales and the Northern Territory.

As a result of receiving more than 50% of the acceptances, the consortium has extended the offer period to August 21.

Meanwhile, Li Ka-shing looks set to keep buying. On Monday, Cheung Kong Holdings said in an exchange filing that it had submitted a preliminary non-binding proposal for the possible acquisition of “certain aircrafts from the AWAS group”. Terra Firma Capital Partners’ aircraft-leasing firm, AWAS Aviation Capital, is looking to sell a portfolio of planes.

¬ Haymarket Media Limited. All rights reserved.
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