Babcock Infrastructure Scraps Multinet Sale on Bids

By Angela Macdonald-Smith

Nov. 5 (Bloomberg) -- Babcock & Brown Infrastructure Group, owner of ports and energy transmission lines in Australia, Europe and the U.S., scrapped plans to sell its stake in a gas distribution unit in Victoria state after ``inadequate'' offers.

Bidders for the Multinet Gas Network were few or were seeking higher returns than were available, Chief Executive Officer Jeff Kendrew said today in an address to shareholders in Sydney. Talks are continuing for the sale of stakes in the European ports business and the WestNet Rail unit in Western Australia, and an outcome is expected by Christmas, he said.

BBI, whose shares have slumped 80 percent in the past six months, yesterday announced the sale of half of its Powerco Ltd. unit and is in talks for further divestments to cut borrowing and provide funds for investment. The company earlier today said it will suspend dividend payments to preserve cash.

``We said in August and September that BBI would only agree to divest assets where security-holder value is delivered,'' Chairman David Hamill said in a separate address, which was also sent to the Australian stock exchange. ``We have not changed our view.''

Babcock Infrastructure, which is managed by Babcock & Brown Ltd., dropped as much as 25 percent to 19 cents in Sydney trading and was at 19.5 cents at 2:32 p.m. local time. The decline compared with a gain of as much as 2.5 percent in the exchange's benchmark index.

`Difficult' Sales

The company may need to sell stakes in other core assets where it hadn't previously considered taking on a partner, ``particularly if financial markets do not improve in the timeframe for where customers require that growth to be exercised,'' Kendrew said. BBI is continuing to study all forms of capital raising for growth projects, he said.

BBI's principal assets include the Dalrymple Bay coal terminal in Queensland state, Australia's second-biggest export harbor for the fuel.

``Selling assets in this market is extremely difficult - many would-be buyers are capital-constrained themselves, and the opportunists have a glut of options to choose between, which can result in downward pressure on prices,'' Kendrew said.

BBI said its outlook for revenue next year is ``solid'' and that its businesses are performing ``broadly in line'' with expectations. The economic slowdown provides ``some degree of uncertainty'' for the outlook of the transport businesses, and volume growth may slow at WestNet Rail and Euroports, Kendrew said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net