Power duo in $372m bid for GasNet - Business - Business - smh.com.au

BABCOCK & Brown Infrastructure Group and Australian Pipeline Trust have bid $372 million for GasNet Australia Group, hoping to cut costs and compete to supply gas into Sydney.
Australian Pipeline, the nation's biggest pipeline owner, and Babcock & Brown Infrastructure are offering 1.545 Babcock Infrastructure shares for each GasNet security. The offer values each Gasnet shares at $2.55, a 6.7 per cent premium to its closing price on Friday.
The two companies want to increase their share of an energy market that is forecast by the Government to grow 38 per cent by 2020. Buying GasNet, the largest pipeline operator in Victoria, would help them win customers in the two most populous states, Australian Pipeline chief executive Mick McCormack said yesterday.
"It will give them more flexibility to offer seamless gas contracts over both Victoria and NSW," said Jason Mabee, a utilities analyst at ABN Amro Australia. "It's a positive but it's not going to let them pay a big premium."
GasNet shares closed 23c, or 9.6 per cent, higher at $2.62.
The timing of the Babcock offer was "very opportunistic," said Nathan Lim, an analyst at Aegis Equities Research, who values the stock at $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 had assessed the offer, the company said in a statement to the exchange. Last month GasNet chairman Rod Keller said the company might take part in the consolidation of the pipeline industry.
Shares in Babcock & Brown Infrastructure closed 1c lower at $1.64. Australian Pipeline rose 9c, or 2.2 per cent, to $4.33.
The two companies have formed Babcock & Brown GP Australia to make the bid and will sell their combined 14.2 per cent stake to Babcock & Brown GP. Australian Pipeline will buy a 50 per cent stake in the business for $180 million in cash, provided the offer is accepted.
Australian Pipeline, which bought the Murraylink power transmission cable for $153 million in March, last month signed an accord to build a $130 million natural gas pipeline in northern Australia to supply fuel from a field owned by Italy's Eni. It owns the 2029km pipeline from Moomba to Sydney.
Buying GasNet's business would allow the company to make better use of the pipeline linking the two states, in turn boosting volumes on the Moomba pipeline, Mr McCormack said.
Babcock & Brown Infrastructure has more than tripled in size in the past 18 months by buying assets, including New Zealand's Powerco and the UK's PD Ports.
The GasNet transaction will increase the fund's profit before interest, tax and depreciation to more than $800 million, with about two-thirds of that coming from energy distribution and transmission, according to a presentation yesterday.
The cash from Australian Pipeline will also reduce the debt the fund is taking on for its $US2.2 billion ($2.9 billion) purchase of South Dakota's Northwestern Corp, chief executive Steven Boulton told journalists on a conference call.
Moody's said it might cut GasNet Australia's Baa2 rating. Standard & Poor's said it might cut its BBB credit rating.
Bloomberg