China Energy Reserve and Chemical Group is confident an increased, off-market takeover offer for Australian oil and gas producer AWE will be compelling for shareholders, with a new deal proposed today valuing the target at more than $460 million.
CERCG announced today a fresh all-cash takeover offer for the oil and gas producer, valued at 73 cents per share.
The company withdrew a 71 cents per share offer earlier this week, after AWE said it was not compelling enough for it to open its books to allow CERCG due diligence.
CERCG’s new offer is a 33.9 per cent premium to AWE’s last closing share price of 54.5 cents per share, and a 46 per cent premium to the issue price of AWE’s recent $38 million capital raising, which was priced at 50 cents per share.
CERCG Australia business manager Kevin Gao said in a conference call with reporters that the offer provided AWE shareholders an opportunity to lock in certain value at an attractive price while removing significant operational and market risks.
“We want to make it clear that our offer has no Chinese regulatory approvals required. We have funding available outside of mainland China,” Mr Gao said.
“We are well advanced with our FIRB approval process and we are confident that the conditions are readily able to be satisfied, which are substantially in the control of the AWE board.
“Our announcement set out a number of reasons why AWE shareholders should accept the offer.
“In particular, shareholders have the opportunity to realise a substantial value for their shares, which recognise the future value of their investment.
“By accepting this offer, shareholders will no longer be exposed to the development, financing and other risks and uncertainties associated with this investment.”
CERCG is preparing a bidder’s statement, which will be lodged with the ASX and issued to shareholders in due course.
The key hangup that resulted in the previous offer being withdrawn was AWE’s unwillingness to give CERCG the opportunity to undertake due diligence on the transaction.
Due diligence remains a condition on the off-market bid, as well as a 50 per cent minimum acceptance condition.
Argonaut managing director Eddie Rigg said the new offer was a very full and fair offer, at a substantial premium not only to AWE’s last closing share price, but also its last capital raising.
Mr Rigg said he was optimistic the fresh offer would convince AWE to open its books.
“At the moment we can’t speculate what will happen if they give us due diligence, we have tried to get due diligence, we haven’t received due diligence, but if they do, we can’t speculate what that will mean,” Mr Rigg said.
AWE’s key asset is its Waitsia gas venture in the onshore Perth Basin in Western Australia, while it also owns stakes in gas and oil projects in Australian and Indonesia.
CERCG said the Waitsia field had the potential to return significant value to shareholders long term, and it was for that reason that it was prepared to pay a substantial premium for the company.
“CERCG cautions shareholders that meaningful positive cashflow from WAitsia is not expected until at least the back end of calendar year 2020, some three years in the future,” the company said in a statement to the ASX.
“AWE shareholders now have a clear choice to make: they need to weigh up the future benefits and risks of remaining a shareholder of a company with a track record of not delivering acceptable shareholder returns against the alternative they now have of accepting a compelling cash offer to acquire all of their shares at a significant premium.”
CERCG, a fully integrated global energy company which was established in 1981, also said it had intended to retain the majority AWE’s management and operational teams.
The company counts National Petroleum Corp as one of its major shareholders and has more than 10,000 employees with offices in Beijing, Shanghai, Australia and Canada, with annual turnover of around ¥40 billion ($US600 million).