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Why the DUET Group share price has rocketed 18% this morning

The shareholders of DUET Group (ASX: DUE) have certainly had a great start to the week. The owner of regulated energy utility infrastructure businesses has seen its share price rise a whopping 18% to $2.77 in early trade after the company responded to media speculation and confirmed that it is the subject of a takeover offer.

Over the weekend the Australian Financial Review reported that Hong Kong’s Cheung Kong Infrastructure (CKI) tabled a conditional and unsolicited offer of $3.00 per share for the company, valuing it at approximately $7.3 billion.

This morning the DUET board revealed that it is in the process of evaluating the proposal and advised shareholders to take no action. The board warned that at this stage there is no certainty that the proposal will go any further.

It is worth remembering that even if the proposal were accepted the deal would have to go through the Foreign Investment Review Board.

It isn’t the first time that CKI has been interested in Australian utilities. Earlier this year the company attempted to acquire New South Wales-based electricity distributor Ausgrid. That $11 billion offer was rejected by Treasurer Scott Morrison over national security concerns.

But with its shares priced just 23 cents lower than the offer price, it appears investors are reasonably confident that the takeover will complete.

I wouldn’t recommend buying its shares in hope of a better offer. This offer is a 27.6% premium to the last close price and I feel it is unlikely that anyone will better it.

I believe investors seeking exposure to the industry would be better off taking a closer look at AGL Energy Ltd (ASX: AGL) or the upcoming Alinta Energy IPO.

If you missed out on DUET's gains this morning don't worry. The smart money is on these hot stocks being the big winners in 2017. Is yours?

Big, Fat, Dividends

This company's dividend is almost the stuff of legends. Its reliable cash flows support a high payout ratio, and the company's stash of franking credits are the cherry on the top of the dividend cake. Based on the last 12-months of dividends, shares are offering a fully-franked 6.5% yield, which grosses up to a whopping 9.3%, when those franking credits are included.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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