Li Ka-shing Sweetens Deal for Australian Energy Company

Li Ka-shing, one of Asia’s richest men, in Hong Kong last year. A deal to take control of an Australian energy company, the Duet Group, has won unanimous support from Duet’s board of directors. CreditJustin Chin/Bloomberg

Hong Kong’s richest man has taken a step closer to winning control of a big Australian energy company, as he seeks to overcome Australia’s occasional wariness toward foreign investors from China.

Companies controlled by Li Ka-shing, the Hong Kong billionaire, on Monday announced a sweetened deal worth 7.4 billion Australian dollars, or about $5.5 billion, for control of the Sydney-listed Duet Group, which operates natural gas pipelines and electricity distribution companies in the states of Western Australia and Victoria.

The offer, valued at 3.03 Australian dollars per share, including a special dividend, was a step up from the 3 dollars Mr. Li’s companies had bid in December. It also won unanimous support from Duet’s board of directors, who described it in a statement as “fair and reasonable and in the best interests of Duet security holders.”

Although Chinese demand for iron ore and agricultural products remains a major driver of the Australian economy, investment from China or China-linked sources can still be regarded as suspect by the Australian government. Local would-be home buyers in big cities like Sydney and Melbourne bemoan soaring property prices, which they attribute in part to an influx of wealthy Chinese.

Recent indications suggest Australia’s wariness of Chinese money is on the rise.

In August, the Australian government cited national security concerns when it rejected competing, separate bids from a group of Mr. Li’s publicly listed companies and the State Grid Corporation of China, which is owned by Beijing. The rival bidders had sought control of Ausgrid, a company that supplies electricity to Sydney and neighboring areas.

Australia’s foreign investment laws require the national treasurer to sign off on major acquisitions by overseas buyers. Describing the Hong Kong and mainland China bids as “contrary to the national interest,” the treasurer, Scott Morrison, said at the time that “national security issues were identified in critical power and communications services that Ausgrid provides to businesses and governments.”

Mr. Morrison also must weigh in on the new bid for Duet, which was made by three publicly traded Hong Kong companies Mr. Li controls: Cheung Kong Infrastructure, Cheung Kong Property and Power Assets.

Investors cheered the news of the bid, and shares in Duet ended the day up 5.4 percent. But at 2.93 dollars, the stock was still trading below the offer price, suggesting investors see a chance the deal may not go through.