Government Rejects CKI-APA Takeover

By Glenn Dyer | More Articles by Glenn Dyer

For the second time in three years a big Hong Kong group has been knocked back trying to buy major Australian infrastructure.

That was after the Morrison government yesterday rejected a $13 billion Hong Kong’s CK group from buying Australia’s dominant gas pipeline network, APA Group.

Treasurer Josh Frydenberg issued a “preliminary” view late on Wednesday that the bid from CK Group of Hong Kong to buy pipeline company APA Group should be turned down on national interest grounds.

CK group now has just two weeks to appeal the decision.

APA’s securities will be worth watching today – they ended at $9.51 yesterday, down 0.1% and will come under enormous selling pressure today in early trading. CKI had offered $11 for each APA security.

FIRB did approve CK Group’s $7 billion takeover of energy infrastructure group Duet in 2017 for $7 billion but in 2016 knocked back its $12 billion bid for the NSW electricity infrastructure group, Ausgrid.

That decision is widely understood to have been based on national security grounds because Ausgrid provides services to a number of key defence and intelligence agencies.

Industry funds group, IFM Investors and Australian Super later paid $A16.2 billion to the NSW government for Augrid. That was after a joint bid by State Grid Corp of China and Hong Kong-listed Cheung Kong Infrastructure Holdings Ltd were blocked by the federal Government.

The Treasurer made his decision under foreign investment laws after the Foreign Investment Review Board (FIRB) could not reach a unanimous decision on the bid but expressed concerns about the implications for the national interest in the CK Group bid.

FIRB made its decision with input from the newly created Critical Infrastructure Centre, according to media reports yesterday.

The decision comes at a highly sensitive time for Australian relations with China. Foreign Affairs Minister, Marise Payne is due in Beijing later today for high level meetings that will be the first with a senior Chinese official for the Australian government in two years.

The ruling comes after months of argument over the importance of the network, which carries gas throughout the east coast of Australia and the risk to the national interest from foreign control including from investors linked to China.

“I have formed this view on the grounds that it would result in an undue concentration of foreign ownership by a single company group in our most significant gas transmission business,” Mr Frydenberg said in a statement.

CK and APA had undertaken to sell off APA’s West Australian gas networks to meet concerns from the ACCC.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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