China in AWE takeover push. Bid not attractive enough, target firm says

Australian oil and gas company AWE Limited has received a proposal from China Energy Reserve and Chemical Group for the acquisition of 100% of shares in AWE.

AWE said on Thursday that the unsolicited, non-binding, indicative, and conditional offer came from China Energy Reserve and Chemical Group’s (CERCG) Australian subsidiary.

The Australian company added that China’s state-owned CERCG wanted to acquire 100% of the shares in AWE, on a fully diluted basis, at a price of $0.71 cash per share under either a recommended takeover bid or a scheme of arrangement (indicative proposal).

At such a price, the total cash consideration for a 100% share acquisition stands at around $430 million. When compared, the $0.71 per share offer by CERCG is higher than the $0.55 and $0.545 closing prices of shares the company reported on Wednesday and Thursday.

It is also worth noting that the stock price soared on Friday after the offer came to light. At the moment, the share price of AWE stands at $0.67.

Indicative proposal

The indicative proposal includes the acquisition of any shares that are issued by AWE under the recently announced share purchase plan that is currently scheduled to close December 14.

AWE did disclose the receipt of the indicative proposal before the company’s board concluded its assessment of the proposal, but its initial reaction is that the proposal is “not sufficiently attractive to provide access to due diligence.”

It must be said that such an offer is subject to several conditions, including completion of satisfactory due diligence, obtaining Foreign Investment Review Board approval, execution of an implementation agreement, and approval by CERCG’s board.

The company added that there was no certainty and no guarantee that the indicative proposal would result in a transaction, adding it would keep the market informed on any material developments related to takeover offer.

“AWE shareholders do not need to take any action in response to the Indicative Proposal at this stage,” AWE said, adding it has appointed UBS AG, Australia Branch as financial advisor and Allens as legal advisor.

Prior takeover attempts

The company has previously received and rejected takeover offers, one in May 2016 and one in 2013.

In 2016, AWE received a $421.5 million proposal from Lone Star Japan Acquisitions, Ltd on behalf of the Lone Star Fund. At the time, the A$0.80 ($0.61 at current exchange rates) per share offer was rejected by the company’s board.

As for the offer from 2013, the company rejected a takeover by Senex Energy deeming it not in the best interests of AWE shareholders, and not appropriate to pursue.

AWE currently has assets offshore and onshore Australia as well as in the Natuna Sea off Indonesia. BassGas and Casino are the company’s Australian offshore projects while the only remaining offshore project is Ande Ande Lumut off Indonesia since AWE sold its stake in the Tui field off New Zealand.

Onshore, the company is the operator of the Waitsia gas project and holds stakes and operatorships of several licenses in the Perth Basin.

Regarding production levels, the company has produced 2,75 million boe in 2017 so far. In comparison, AWE produced around five million boe in 2016.

Offshore Energy Today Staff