APA Shares Plummet 9.57% with Frydenberg’s Knockback

APA Group [ASX:APA] shares have taken a blow in the opening hours of today’s trading, sitting just shy of 10% less than yesterday’s closing price at time of writing.

The company — Australia’s largest natural gas infrastructure business — informed the ASX early this morning of Treasurer Josh Frydenberg’s adverse opinion on the proposed acquisition of APA by the Chinese company CK Asset Holdings Limited (known as CK Group).

Details of Frydenberg’s decision are outlined in a media release published on the ASX today.

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CK Group’s offer

CK Group were offering $11 per share for APA. This meant the entire takeover deal was worth a whopping $13 billion.

But the offer was knocked back on Frydenberg’s belief that the acquisition ‘would be contrary to the national interest’.

…it would result in an undue concentration of foreign ownership by a single company group in our most significant gas transmission business.

Frydenberg insists his view is well-informed, having taken into account government assessment and analysis and lengthy discussion with the Foreign Investment Review Board (FIRB).

He also notes that his being against the acquisition ‘is not an adverse reflection on CK Group…my preliminary view reflects the size and significance of APA Group’.

APA owns over half of Australia’s gas pipeline transmission system, supplying gas for all of our mainland capital cities.

Frydenberg reiterates that he welcomes CK Group’s current investment in our gas and electricity sectors.

What this means for APA

The recent drop in share value is likely a market correction of APA’s value.

The acquisition proposal was announced back in June, and the company’s value was likely inflated by optimistic investors gunning for this multi-billion-dollar takeover.

Inevitable market movement in the gas and electricity sectors will also add volatility to the share price.

Particularly, the recent US midterm election results are bound to create some movement in all market sectors with regards to how this shifts their position in the trade war.

Keep an eye on this space for further updates.


Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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