Treasurer rejects gas pipeline sale

An oil wellhead stands in a well house at the Caelus Energy LLC Oooguruk Development Project in Harrison Bay Alaska U.S. on Feb. 17 2017

An oil wellhead stands in a well house at the Caelus Energy LLC Oooguruk Development Project in Harrison Bay Alaska U.S. on Feb. 17 2017

CK Consortium needs approval of Australia's Foreign Investment Review Board to take over APA Group, which owns more than 43,700 kilometers (27,100 miles) of gas pipeline in Australia.

Treasurer Josh Frydenberg made the announcement on Wednesday, saying he has told CK Group of Hong Kong that he plans to prohibit its $13bn acquisition of APA Group, the owner of 15,000 km of gas pipelines in Australia.

Frydenberg said that his initial view of the transaction was formed on the grounds that it would result in an "undue concentration of foreign ownership" by a single company group in Australia's most significant gas transmission business.

"I intend to make a final decision under the formal process within two weeks".

The Australian Competition and Consumer Commission in September gave the green light to the takeover, but the Treasurer said that decision was based on broader considerations than those studied by the competition regulator.

CK Group has moved to defend its investment record.

"The application of our foreign investment policy, expressed through my preliminary view, is not discriminatory against any investor or country".

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Morrison, who served as treasurer before replacing former Prime Minister Malcolm Turnbull in August, has blocked several deals involving China-linked companies in the past three years, drawing ire from the government in Beijing.

Many in the Coalition had spoken against the proposed acquisition, with ex-deputy prime minister Barnaby Joyce throwing his Akubra into the ring the other week suggesting that many MPs had concerns but were too anxious over Australia's wider relationship with China to speak out.

Though Hong Kong is part of China, it's a specially administered region with its own mini constitution that allows for some freedoms more comparable to the West than the mainland.

"This decision certainly isn't surprising and suggests the trend set by Turnbull in knocking back big asset purchases by China-linked companies will be continued under Morrison", said Martin Drum, a senior political lecturer at Notre Dame University in Perth.

It was also made despite a pre-emptive offer by CKI to offload APA's WA assets such as the Parmelia, Goldfields and Kalgoorlie pipelines to avoid competition concerns given its ownership of the Bunbury to Dampier pipeline. Frydenberg said concentration of foreign ownership was not a question considered by the regulator.

The preliminary decision by Treasurer Josh Frydenberg is the latest in a series of rejections by Canberra over foreign purchases of Australian infrastructure and land as leaders grow increasingly concerned about Beijing's influence.

As a result, APA's shares have been trading well below the A$11 offer price. Its shares closed yesterday at $9.51. The deal represented a 33% premium at the time it was announced.

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