AusNet (ASX:AST) share price down 5% amid takeover battle uncertainty

AusNet’s shares are falling on Wednesday…

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The AusNet Services Ltd (ASX: AST) share price looks set to end its positive run on Wednesday.

In late morning trade, the electricity distributor’s shares are down 5% to $2.46.

However, the AusNet share price is still up almost 24% since this time last week.

What’s happening with the AusNet share price?

Investors have been bidding the AusNet share price higher this week after it received two takeover approaches.

On Monday Brookfield Asset Management made a non-binding offer to acquire the company for $2.50 per share. In response to this, AusNet decided to provide Brookfield with the opportunity to conduct exclusive due diligence for a period of eight weeks.

The latter was a blow for rival electricity distributor APA Group (ASX: APA), which tabled an even better offer of $2.60 per share in cash and shares on Tuesday. However, due to the period of exclusivity granted to Brookfield, the AusNet board will not be considering that offer at this time.

This didn’t go down well with APA, particularly given how it had made AusNet aware that an offer was coming.

AusNet hit back and explained: “The Board of AusNet agreed to this period of exclusivity in return for a materially increased indicative all cash offer price from Brookfield, as well as retaining the option to engage with other parties, including the provision of due diligence, with respect to any potential competing proposals post expiry of the exclusivity period with Brookfield.”

What’s next?

Given the due diligence situation, AusNet shareholders will have to wait until late November to learn whether the higher APA offer is going to be considered.

However, there are a couple of potential scenarios to consider before then. One is that if Brookfield were to make its offer binding, there’s always a chance AusNet could accept a lower, but binding offer, rather than run the risk of rejecting it and betting everything on a higher but non-binding offer. Especially given how APA’s offer is a mix of cash and shares.

In APA’s favour, there is the foreign investment review board (FIRB) to consider. Given that Spark Infrastructure Group (ASX: SKI) is in the process of being taken over by a North American consortium, there are concerns that the FIRB might not let another electricity distributor fall into the hands of overseas investors.

Especially given how all of Victoria’s electricity distribution and transmission infrastructure would be foreign owned if the Spark deal completes and AusNet were sold to Brookfield.

All in all, this takeover approach, and the AusNet share price, could be worth watching closely over the coming weeks and months.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended APA Group. 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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