APA share price rises amid takeover rumours

APA shares are in focus as reports suggest the company could be the target of a takeover.

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Key points

  • The APA share price is rising amid takeover rumours
  • Global Investment Partners was named as one potential buyer
  • APA is also looking for takeover targets, according to reports

The APA Group (ASX: APA) share price is currently up 2.54% at $11.895. This comes amid news that the gas and energy infrastructure business is a possible takeover target.

APA owns an extensive 15,000km gas pipeline in Australia which connects sources of supply and markets across mainland Australia.

It operates and maintains networks that connect 1.4 million Australian homes and businesses to the benefits of natural gas. It delivers half of the nation’s natural gas usage.

Takeover speculation

According to reporting by The Australian, APA is being looked at by at least one potential buyer.

How close is a takeover bid? The newspaper reported that sources say a party hasn’t yet made an approach to the APA board, but “the talk” is that at least one prospective buyer thinks it would be “better placed to oversee an energy transition of the business away from gas”.

It would be a hefty takeover if it were to go ahead. The APA market capitalisation is $13.7 billion according to the ASX, before today’s APA share price movement.

However, it was pointed out that plenty of the potential investors may not be interested in buying APA because of the fact that it has gas-related assets – many funds would prefer targets that are more environmentally friendly.

Potential buyer

The Australian named US investor Global Investment Partners as one fund that “could buy the business”. It has already shown interest in Australian assets after buying a stake in the Woodside Petroleum Limited (ASX: WPL) Western Australian Pluto Train 2 project for around $4 billion.

Some of GIP’s assets around the world are gas pipelines, so APA’s assets could make sense for its asset base.

APA is also on the hunt

Despite the volatility that the global economy is seeing with inflation and rising interest rates, APA is also reportedly interested in making its own deals.

The Australian reported that APA is looking at a $4 billion electricity transmission business in the US, the Basslink power cable, Renewable Energy Zones, and CWP Renewables in Australia.

Previously, the company had also been looking at gas opportunities including the Chesapeake Utilities Corporation (NYSE: CPK), according to the newspaper.

What next for the APA share price?

APA has recently given investor presentations showing how decarbonisation and the rise of new energy technologies are creating opportunities in electricity transmission and renewable energy microgrids. However, it notes that gas still has a “critical” role to play.

The business is looking at converting (some of) its pipelines to carry hydrogen. It could also carry a blend of hydrogen and natural gas.

In a few months, APA will release its FY22 result and it’s expected to pay its FY22 final distribution.

The APA share price has risen around 17% since the start of 2022.

Motley Fool contributor Tristan Harrison 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 has positions in and has recommended APA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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