Australia Knocks Back CK Pipeline Bid Citing National Security - EcoFinBiz Blog

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Australia Knocks Back CK Pipeline Bid Citing National Security

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(Bloomberg) -- CK Group’s A$13 billion ($9.4 billion) bid for gas pipeline operator APA Group was knocked back by Australia’s government on national security concerns, a decision that has the potential to further inflame diplomatic tensions with China.

“I have advised the consortium led by CK Asset Holdings Ltd. of my preliminary view that its proposed acquisition of APA Group would be contrary to the national interest,” Treasurer Josh Frydenberg said in a statement Wednesday.

His view was based on concerns it would lead to an undue concentration of foreign ownership by a single company group in one of the countries most significant gas transmission businesses. Frydenberg said he would make a final decision within two weeks.

Louise Watson, an external spokeswoman for APA Group, was not immediately able to comment when contacted after the Treasurer’s announcement. CK representatives weren’t immediately available to comment.

The decision scuppers the Hong Kong-based conglomerate’s biggest overseas deal, which would have given it control of pipelines that deliver about half of Australia’s gas. Rising electricity prices and blackouts have made energy security a hot political issue in the nation, and an overseas acquisition of critical infrastructure would have been sensitive for Prime Minister Scott Morrison’s government.

Deals Blocked

Morrison, who served as treasurer before becoming prime minister in August, has blocked several deals involving China-linked companies in the past three years, drawing ire from the government in Beijing. Ties between the two nations have been strained since December after the government implied China was meddling in Australian politics and media.

As the most China-dependent developed economy, Australia potentially has a lot to lose should relations with its biggest trading partner deteriorate further. Wine companies complained earlier this year that the frayed ties were behind shipments being delayed at Chinese ports.

CK Group’s cash offer was split among subsidiaries CK Asset Holdings Ltd., CK Infrastructure Holdings Ltd. and Power Assets Holdings Ltd. It was cleared in September by the competition regulator, after the conglomerate agreed to sell natural gas pipeline and storage infrastructure assets in Western Australia to appease anti-trust concerns.

Previous Knock-back

CK, whose Australian portfolio includes power distributor Duet Group, has been blocked in the nation before. The government rejected a bid by CK Infrastructure in 2016 for the electricity network Ausgrid, saying it would undermine national security. State Grid Corp. of China’s effort to buy a controlling stake in the electricity distributor was also rejected.

The energy industry isn’t the only sector subject to high levels of scrutiny by Australia’s Foreign Investment Review Board. Morrison vetoed the sale of iconic cattle company, S. Kidman & Co., in 2016 to a Chinese-led group saying it could be against the national interest.

In August, the government banned China’s Huawei Technologies Co. and ZTE Corp. from supplying next-generation wireless equipment to the nation’s telecom operators. That prompted criticism from Beijing.

“Instead of exploiting all kinds of excuses to create hurdles and taking discriminatory measures, we urge the Australian side to abandon political biases and create a sound environment for fair competition for Chinese enterprises in Australia,” Foreign Ministry spokesman Lu Kang said at the time.

--With assistance from Rebecca Keenan and Matthew Burgess.

To contact the reporters on this story: Jason Scott in Canberra at jscott14@bloomberg.net;James Thornhill in Sydney at jthornhill3@bloomberg.net

To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Edward Johnson

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