SYDNEY Hong Kong's Chow Tai Fook Enterprises (CTFE) on Thursday said it had agreed to purchase Australian gas and electricity retailer Alinta Energy, in a deal two sources familiar with the matter said was valued at about A$4 billion ($3 billion).
It marks the first investment in the Australian energy sector for CTFE, a sprawling privately-held conglomerate best known for retail arm Chow Tai Fook Jewellery Group. It also controls infrastructure group NWS Holdings.
The family-controlled business already invests in Australian property including a joint venture with casino operator Star Entertainment group Ltd, and its foray into energy should offer steady returns, analysts said.
Alinta, owned by private equity companies including TPG Capital, had been preparing for an initial public offering. Brokers had valued Alinta at an average of A$3.4 billion, making the Chow Tai Fook Enterprises offer attractive in comparison, one of the sources said.
The sources declined to be named because they were not authorized to speak publicly about the deal.
CTFE and Alinta declined to disclose the transaction price. CFTE would fund the deal itself and had no plans to list Alinta or roll it into NWS, one of the sources said.
Australian energy and utility assets are attractive to foreign buyers because of strong growth opportunities, particularly power retailers as electricity prices have soared over the past five years.
"A lot of these parties have huge amounts of money they want to invest in a stable country where they can get good returns," said Matthew Fitzgerald, a partner at law firm Herbert Smith Freehills specializing in mergers and acquisitions.
Hong Kong and China combined are the fifth-biggest sources of foreign investment in Australia but some approvals in the past have been complicated by national security concerns.
Canberra last year rejected bids from China's State Grid Corp and Hong Kong's Cheung Kong Infrastructure Holdings for electricity grid Ausgrid on national interest grounds.
CKI's subsequent $5.5 billion bid for DUET Group, which owns a power grid in the Australian state of Victoria, is still under review by the Foreign Investment Review Board (FIRB).
Analysts said that while CTFE Chairman Henry Cheng was a member of the People's Political Consultative Conference, China's political advisory body, the Alinta deal was not expected to face regulatory problems.
Alinta is a retailer of energy, not a distributor like DUET, and it already has foreign ownership.
“In this particular case with Alinta I would be surprised if there were concerns," Fitzgerald said.
State-owned China Huadian Corp received regulatory approval to buy Alinta last year but it was unable to reach a deal with the company's owners, one of the sources said.
Alinta generates 1,800 megawatts of power from a group of small gas-fired power stations in Australia alongside its retail business.
(Reporting by Jamie Freed in Sydney and Donny Kwok in Hong Kong; Editing by Stephen Coates)