China Energy Reserve and Chemical Group has pulled out of a $430 million bid to acquire Australian oil and gas producer AWE, less than a week after the non-binding deal was announced on the ASX.
AWE announced on Thursday last week that state-owned enterprise CERCG’s Australian subsidiary had offered 71 cents per share to acquire all the equity in the company, valuing the target at around $430 million.
The proposal was subject to due diligence, Foreign Investment Review Board approval, approval from CERCG’s board of directors and the execution of an implementation agreement.
AWE announced today that it had received notice from CERCG that it had formally withdrawn the proposal, sending its shares down 11 per cent, falling to 61.7 cents as of 11:00AM AWST.
CERCG’s offer was made based on publicly available information, according to an ASX announcement made by AWE last week, which detailed the full terms of the proposal.
At 71 cents per share, the offer was a 30 per cent premium to AWE’s share value at close on Wednesday last week, but well under RBC analysts’ valuations of the company of 91 cents per share.
The Chinese group had requested AWE to provide detailed financial reports prior to formalising its offer, but AWE said in an announcement to the ASX that its initial reaction was that the offer was not high enough to justify access.
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.
The company lodged a $217.5 million loss in the 2016-17 financial year, mainly on the back of heavy write-downs in the value of its Indonesian assets, which at current oil prices are not considered to be viable.
Notwithstanding those difficulties, the Waitsia venture remained an attractive asset for CERCG, which intended to accelerate its development, had a deal been done.
CERCG, a fully integrated global energy company which was established in 1981, also said it had intended to retain the majority AWE’s management and operational teams.
The company counts National Petroleum Corp as one of its major shareholders and has more than 10,000 employees with offices in Beijing, Shanghai, Australia and Canada, with annual turnover of around ¥40 billion ($US600 million).
CERCG has built, owns and operates more than 1,100 kilometres of natural gas pipelines, 300 LNG fuelled trucks for LNG transportation and distribution, as well as more than 100 LNG and CNG filling stations in China.
CERCG has also built, owned and maintained natural gas supply networks for more than 50 major Chinese cities.
AWE today said it remained fully committed to acting in the best interests of its shareholders.
The CERCG proposal was the second major international takeover bid lodged for AWE in recent years, following a $421 million approach from US-based private equity group Lone Star in 2016.