By Robb M. Stewart

MELBOURNE, Australia--Australian utility Duet Group (DUE.AU) has agreed to 7.3 billion Australian dollars (US$5.48 billion) takeover by Hong Kong tycoon Li Ka-shing's Cheung Kong Infrastructure Holdings Ltd. (1038.HK).

The offer, which looks set to test Canberra's openness to overseas investment, has been unanimously recommended by Duet's board after it last month agreed to open its books to CKI and related entities Power Asset Holdings Ltd. (0006.HK) and Cheung Kong Property Holdings Ltd. (1113.HK).

Under the cash offer, Duet's shareholders will receive A$3 a share, a 29% premium to the last trading price before the unsolicited bid was first disclosed in December. On top of that, shareholders will also get a special payout from Duet of A$0.03 a share.

With a takeover, CKI will secure assets that include the Dampier Bunbury natural-gas pipeline, which connects gas reserves on Western Australia state's offshore North West Shelf with customers in Perth and surrounding areas, and gas and electricity distribution networks in the southeast around Melbourne.

The agreement comes several months after Australia's government, citing national security, knocked back separate bids by CKI and state-owned State Grid Corp. of China to take control of electricity-network operator Ausgrid. That deal that would have been valued at more than A$10 billion.

Australia's conservative government has said it welcomes Chinese investment, despite its decision to block the Ausgrid takeover. However, earlier last year it rejected an offer for S. Kidman & Co., the country's largest cattle ranch, from a group headed by a Chinese conglomerate.

Hong Kong-based CKI is already one of the largest overseas investors in Australian infrastructure. It owns SA Power Networks, an electricity distributor in the state of South Australia, Melbourne electricity supplier CitiPower, gas distributor Australian Gas Networks Ltd. and an electricity distributor and a renewable-energy transmission business in Victoria state.

Duet said it was first approached in November by the CKI consortium with an offer of A$2.90 a share, which was subsequently raised. Its board said total cash proceeds of A$3.03 a share fully recognized the value and future growth platform created by Duet.

Subject to regulatory and shareholder approval, as well as a report by an independent expert, Duet said it expected the deal would be implemented by mid-May.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 15, 2017 17:34 ET (22:34 GMT)

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