The takeover of Envestra Limited (ASX: ENV) by Australia's largest natural gas infrastructure business APA Group (ASX: APA) has taken an interesting turn today.
What started back in July 2013 as a merger and eventually developed into a Scheme of Arrangement which was recommended by Envestra's board and looked set to be approved by shareholders in the coming weeks, has potentially been thrown into disarray. This is due to the emergence of a counter proposal from 17.5% shareholder Cheung Kong at $1.32 per share.
The announcement sent Envestra's share price rocketing 18% from yesterday's closing price of $1.13 to $1.34 in early afternoon trade on Friday. It is great news for Envestra shareholders that a bidding war has broken out for their stock, however, with APA holding a 33% stake it would appear APA holds significant sway in the eventual outcome of this battle.
The emergence of Cheung Kong with a competing bid once again highlights the potential profits to be made from engaging in takeover arbitrage – a strategy which Warren Buffett employed regularly when he was investing smaller sums of money.
The recent takeover offer by Aurizon Holdings Ltd (ASX: AZJ) and Boasteel for Aquila Resources Limited (ASX: AQA) is another situation which investors could consider the merits of attempting to arbitrage from.
