Treasurer nixes CK Group APA bid for 'national interest' reasons

Lloyd Doyle
November 10, 2018

He is expected to make a final decision within weeks.

"I don't think its just the China element, but a combination of important assets, concentration of ownership and China", said Morningstar analyst Adrian Atkins.

Mr Frydenberg stressed the preliminary decision was not an adverse judgment on CKI but rather reflected the importance of APA to the national economy.

The decision, while not unexpected, will further test Australian-Chinese relations after a number of similar rejections by the coalition Government to buy-out proposals from companies in the Middle Kingdom. New laws created to counter foreign influence were enacted this past summer, and the rhetoric eased on both sides after Turnbull was replaced as Prime Minister by Scott Morrison in August. APA shares closed on Thursday at A$9.51, compared with CK's offer price of A$11.

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 country's most significant gas transmission businesses.

CK Infrastructure, which had been confident of securing approval for its takeover of APA, already owns several power and gas network assets across Australia.

The Australian Competition and Consumer Commission in September gave the green light to the takeover, but the Treasurer said that decision was based on broader considerations than those studied by the competition regulator.

Australia's other large pipeliner Jemena, building the Northern Gas Pipleine, is 60% owned by China State Grid, though this was not listed as a factor in Frydenberg's reasoning.

Australia will continue to welcome foreign investment not contrary to national interest, he said.

"The application of our foreign investment policy, expressed through my preliminary view, is not discriminatory against any investor or country".

The top five investors in Australia are the United States, the UK, Belgium, Japan and Hong Kong, with the Department of Foreign Affairs and Trade saying that "Chinese investment in Australia have grown significantly over the past decade".

Though Hong Kong is part of China, it's a specially administered region with its own mini constitution that allows for some freedoms more comparable to the West than the mainland.

If the question comes up in Beijing, Payne is likely to stick to the script drafted by Frydenberg and though it may be a hurdle to the diplomatic "reset" China knows its trading partner well enough to understand the decision. The deal represented a 33% premium at the time it was announced. Former Prime Minister Malcolm Turnbull regularly accused the Chinese Communist Party of seeking undue influence in Australian politics, in its university system, and in the large Chinese community in Australia.

Other reports by Iphone Fresh

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