A Tale of Two Bids
PUBLISHED
2021-08-23
Content
Electricity distributor Spark Infrastructure has gone to foreign buyers, now Ampol wants to square the ledger by buying a rival from New Zealand.
After a month of reflection to allow the bidding group to make up their mind after looking at the books, Spark bowed to the inevitable yesterday and accepted the $2.95-per share takeover bid from a North American consortium.
That valued Spark - a poles and wires electricity company - at $5.2 billion.
The $2.95 was up 30 cents from the first offer price of just over $2.63 a security
Spark this morning said it had agreed to the terms of the binding offer from private equity firm Kohlberg Kravis Roberts, Ontario Teachers’ Pension Fund and PSP Investments.
Spark shares had closed at $2.77 on Friday, well under the higher offer price in a sign the market always understood that there would be no rival offers emerging and the North American group would win the day.
Spark’s acceptance saw the share price rise close to the $2.95 at $2.82, on Monday, a gain of 1.8%.
After the $2.95 a security offer was revealed in late July, Spark agreed to open its books to the consortium for due diligence.
The accepted offer - based on $2.95 per stapled security, is before payment of the interim distribution of 6.25 cents for each stapled security.
The price values Spark at an equity value of $5.2 billion and an enterprise value of $10.1 billion (ie close to $5 billion in debt).
Under the offer, Spark Infrastructure security holders will receive $2.95 cash per stapled security before franking credits, plus additional consideration if the Schemes have not been implemented by February 15, 2022.
The Schemes are subject to approval by Spark Infrastructure security holders at Scheme meetings which are expected to be held by the end of this year.
As usual it also requires court approval and Foreign Investment Review Board approval.
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Meanwhile court, shareholder and regulatory approvals appear to be the only possible bars to Ampol (nee Caltex Australia) from winning New Zealand’s major petrol company Z Energy.
Wellington-based Z Energy, which spans service stations, fuel infrastructure and New Zealand’s oil refinery, said on Monday it had received Ampol’s non-binding proposal valued at $NZ3.78 a share and had it agreed to a period of due diligence and exclusivity.
Zed can trace its recent roots back to Shell’s Kiwi petrol stations and distribution assets.
Ampol CEO Matt Halliday said on Monday that Z Energy presented a “logical growth opportunity”.
“Both companies are market leaders in their respective home markets and have very similar business models,” he said. “A successful acquisition would create an Australia-NZ leader in fuel, with significant regional scale and trusted and iconic brands on both sides of the Tasman.”
The bid comes Ampol revealed it had returned to profit in the six months to June 30.
Ampol was hit hard in 2020 by COVID travel restrictions wiping out demand for transport fuels (especially Jet fuel) and pushing its last-remaining oil refinery ay Lytton on Brisbane to the brink of closure.
Ampol said its bottom-line half-year rose to $325 million, up from a $626 million loss.
Ampol said it expected to receive $40 million from the federal government in the first half of 2021.
“The first half of 2021 has been pivotal for Ampol,” Mr Halliday said. “We finalised our Lytton review, with a commitment to continue operating to support the dual objectives of fuel security and energy transition in partnership with government.”
The board declared a fully franked interim dividend of 52 cents a share.
Z Energy said its board sought external advice and carefully considered each of the non- binding indicative proposals made by Ampol.
"Although the Board considered that the earlier proposals did not value Z’s business sufficiently to justify the requested exclusivity or confirmatory due diligence access, the Board’s assessment of the most recent Proposal is that it would now be in the best interests of the company and shareholders to grant Ampol a four week period of exclusivity (subject to usual exceptions) for Ampol to undertake confirmatory due diligence, develop their Proposal and for the parties to negotiate transaction documentation.
"The acquisition is subject to agreeing the binding transaction documentation, Board approval by both Z and Ampol, Z shareholder approval and High Court approval. Any transaction is expected to be subject to approval by both the New Zealand Commerce Commission and the New Zealand Overseas Investment Office.
"Ampol is confident that the required regulatory approvals will be obtained. Based on Z’s current assessment, and our communications with Ampol to date, a commitment to the full divestment of Gull will be required to further progress the Proposal,” Z said in its statement.
Ampol shares fell 4.7% to $26.22. Perhaps investors didn’t like the company spending newly-regained earnings on an expensive offshore takeover?