THE INDEPENDENT directors of Envestra have recommended its shareholders accept an eleventh hour takeover bid for the natural gas distributor from the Hong Kong-based Cheung Kong Group consortium.

Envestra, which owns about 23,000 kilometres of natural gas distribution networks and 1,100 kilometres of transmission pipelines across Australia, had signed a scheme of arrangement proposal with APA Group in late 2013.

The scheme was to offer Envestra shareholders just over 0.19 new APA shares for each of the Envestra shares sold into the deal, or $1.173 in cash per share – but this offer was capped at $241 million.

The offer had received the approval of the majority of Envestra’s independent board members, but not from directors Ivan Chan and Dominic Chan, the chief financial officer and chief planning and investment officer of Cheung Kong Infrastructure (CKI) Holdings.

The authors of Envestra’s scheme booklet, released in April, wrote that Dominic Chan believed APA Group to have a “different risk and financial profile than Envestra.”

“In particular, he notes that APA Group has assets that are to a large extent unregulated and have a different and more volatile risk profile than Envestra’s assets,” the statement said.

A higher cash consideration would allow Envestra shareholders more flexibility, the statement said.

The concerns led CKI, which holds a 17.46 per cent stake in Envestra, to launch a non- binding and conditional off-market takeover proposal to acquire all outstanding Envestra shares for $1.32 each.

Considering the conditions, Envestra’s independent directors recommended that shareholders accept the Cheung Kong offer, withdrawing their earlier statements in favour of the APA scheme.

Ownership of Envestra would be split between CKI, Cheung Kong and Power Assets Holdings should the proposal succeed.

The Cheung Kong group said the proposal was conditional on it being satisfied with due diligence, approval from the Foreign Investment Review Board and a minimum acceptance of 50% of Envestra shareholders, among other conditions.