Shares in Duet Group have surged as much as 20 per cent after the energy utility operator confirmed it has received a $7.3 billion takeover offer from Hong Kong investor Cheung Kong Infrastructure.
CKI, owned by billionaire Li Ka-Shing, has offered $3 for every share in Duet, valuing the target company at a nearly 28 per cent premium to its closing price of $2.35 on Friday.
Duet on Monday said its board is evaluating the indicative and conditional proposal and offered no recommendation to shareholders for now.
The company has engaged Macquarie Capital as financial adviser and Allens as legal adviser in relation to the offer, but said there was no certainty the proposal will proceed.
Duet Group's major assets include the Dampier-Bunbury gas pipeline in Western Australia, a two-thirds stake in Victoria's electricity distributor United Energy, Victoria gas distributor Multinet and clean energy firm Energy Developments.
Those assets are likely to be complementary to CKI's already significant investments in Australia's energy sector, which include majority stakes in electricity networks in Victoria and South Australia as well as control of the Envestra gas distribution grid in Victoria.
CKI is a global investor in infrastructure, with assets in the UK, Netherlands, Canada, New Zealand, mainland China and Hong Kong.
The Hong-Kong based group suffered a blow to its expansion plans in Australia in August when the federal government knocked back its $10 billion bid for a controlling stake in NSW energy network Ausgrid, citing security concerns.
Analysts believe approval for the new deal from the Foreign Investment Review Board (FIRB), could prove troublesome again.
"While we see Duet's assets as potentially less concerning from a national security perspective than Ausgrid, we believe FIRB approvals remain a significant barrier to a deal proceeding," RBC Capital Markets analyst Paul Johnston said in a client note.
He said one way around the issue could be for CKI to join hands with potential minority partners for the deal, including with Duet's largest shareholder - UniSuper pension fund, which currently owns 16 per cent.
At 1345 AEDT, Duet shares werel up 34 cents or 14.5 per cent. at $2.69.
CKI INVESTMENTS IN AUSTRALIA:
* South Australia electricity distributor SA Power Networks.
* Melbourne city electricity distributor CitiPower
* Victoria's largest electricity distributor Powercor
* Victoria-based renewable energy transmission business Transmission General Holdings.
* Natural gas distributor Australian Gas Networks, formerly known as Envestra.
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