Babcock, Australian Pipeline Bid A$372 Mln for GasNet


June 19 (Bloomberg) -- Babcock & Brown Infrastructure Group and Australian Pipeline Trust bid A$372 million ($274 million) for GasNet Australia Group to cut costs and compete to supply gas into Sydney, Australia's most populous city.
Australian Pipeline, the nation's biggest pipeline owner, and Babcock & Brown Infrastructure are offering 1.545 Babcock Infrastructure shares for each GasNet security. It values the offer at A$2.55, a 6.7 percent premium to its closing price on June 16.
The two companies want to increase their share of an energy market forecast by the government to grow 38 percent to 2020. Buying GasNet, the largest pipeline operator in Victoria, will help them win customers in the two most populous states, Australian Pipeline Chief Executive Officer Mick McCormack said.
``It will give them more flexibility to offer seamless gas contracts over both Victoria and New South Wales'' states, said Jason Mabee, a utilities analyst at ABN Amro Australia Ltd. in Sydney. ``It's a positive but it's not going to let them pay a big premium.''
GasNet shares closed 23 cents, or 9.6 percent, higher at A$2.62 at the 4:15 p.m. close on the Australian Stock Exchange. The stock reached a 19-month low of A$2.14 on June 14.
`Very Opportunistic'
The timing of the Babcock offer is ``very opportunistic,'' said Nathan Lim, an analyst at Aegis Equities Research Pty in Sydney, who values the stock at A$2.55. ``They're not giving much of a premium to the GasNet shareholders. It's not really an awesome deal.''
GasNet shareholders should do nothing until the company has assessed the offer, the company said in a statement to the exchange. Last month, GasNet Chairman Rod Keller said the Dandenong-based company may take part in the consolidation of the country's pipeline industry.
Shares in Babcock & Brown Infrastructure, a fund run by Australia's second-biggest investment bank, closed 1 cent lower at A$1.64. Australian Pipeline rose 9 cents, or 2.2 percent, to A$4.33.
The two companies formed Babcock & Brown GP Australia Pty to make the bid and will sell their combined 14.2 percent stake to Babcock & Brown GP. Australian Pipeline will buy a 50 percent stake in the business for A$180 million in cash provided the offer is accepted.
Pipeline Purchases
Australian Pipeline, which bought the Murraylink power transmission cable for A$153 million in March, last month signed an accord to build a A$130 million natural gas pipeline in northern Australia to supply fuel from a field owned by Italy's Eni SpA. It owns the 2,029 kilometer pipeline from Moomba in South Australia to Sydney in New South Wales.
Buying GasNet's business will allow the company to make better use of the pipeline linking the two states, in turn boosting volumes on the Moomba pipeline McCormack said.
Babcock & Brown Infrastructure more than tripled in size in the past 18 months by buying assets including New Zealand's Powerco Ltd. and the U.K.'s PD Ports Plc.
The GasNet transaction will increase the fund's profit before interest tax and depreciation to more than A$800 million, with about two-thirds of that coming from energy distribution and transmission, according to a presentation today.
The cash from Australian Pipeline will also reduce the debt the fund it taking on for its $2.2 billion purchase of South Dakota-based Northwestern Corp., Chief Executive Officer Steven Boulton told journalists on a conference call.
Moody's Investors Service said it may cut GasNet Australia (Operations) Pty. Ltd.'s Baa2 rating following the offer. Standard & Poor's Ratings Services said it may cut its BBB credit rating.
Babcock & Brown Infrastructure is being advised by Babcock & Brown Australia Pty Ltd., Deutsche Bank AG and Wilson HTM Corporate Finance Ltd.
Australian Pipeline is being advised by Rothschild Australia.
To contact the reporter on this story:
Joyce Moullakis in Sydney at Jmoullakis2@bloomberg.net.
Last Updated: June 19, 2006 02:52 EDT