FAR ponders takeover bid from Australian investment fund

Samuel Terry Asset Management (STAM), a Sydney-based boutique investment management company, is looking into increasing its interest in Australia’s FAR Limited. In line with this, the company has made an off-market takeover offer while FAR has disclosed its intention to contemplate the offer prior to making a recommendation to its shareholders.

FAR Limited confirmed on Monday that it had received an off-market takeover offer from Samuel Terry Asset Management – in its capacity as the investment manager and trustee for Samuel Terry Absolute Return Active Fund – for the acquisition of all the issued fully paid ordinary shares in FAR for $0.45 cash per share.

Samuel Terry Absolute Return Active Fund, which currently has a relevant interest of approximately 4.9 per cent in FAR through the holding of Samuel Terry Asset Management, is seeking to increase its interest in FAR to at least 50.1 per cent.

The investment management company explains that the offer price of $0.45 per share is based on the closing price of FAR shares on ASX at the close of trading on 28 January 2022. The firm further states that this offer provides investors with an opportunity to divest as much of their shareholding in FAR as deemed appropriate without the need to pay brokerage fees, and with the opportunity to receive certain value.

Furthermore, the offer is subject to a minimum acceptance condition of enabling Samuel Terry Asset Management to get a relevant interest in at least 50.1 per cent of all FAR shares – on a fully diluted basis – while other conditions for the completion stipulate no material adverse change in relation to FAR, the S&P/ASX200 index or the Brent Crude Futures Price; no material acquisitions, disposals or new commitments in relation to FAR and its subsidiaries; FAR declares no distributions; no regulatory action and customary no prescribed occurrences in relation to FAR.

The offer is expected to open on 14 February 2022 and close on 14 March 2022, unless extended. In response to the takeover offer, FAR issued a separate statement on Monday to explain that there was no need for shareholders to take any action at this time as the proposed offer was not yet open and would not close until mid-March at the earliest.

In addition, the company will consider the offer and advise shareholders of its recommendation in due course, explaining that there is no certainty the intended takeover bid will be completed. The firm also appointed Baker McKenzie as its legal advisors in relation to this bid.

Moreover, FAR says that the takeover bid recognises its shares are undervalued having regard to cash backing and the potential of FAR receiving a $55 million contingent payment from the sale of its interest in the RSSD project, as well as its existing oil and gas interests.

To remind, following the completion of the sale to Woodside, FAR has no remaining interest in the RSSD licences offshore Senegal – Rufisque Offshore, Sangomar Offshore, and Sangomar Deep Offshore – however, FAR may receive future payments of up to $55 million from the time of first oil production from the Sangomar field, which is targeted for 2023.

Under the terms of the agreement, these payments are contingent on the future oil price being above $58 per barrel. It is worth noting that this is not the first time that FAR has received a takeover bid as the firm got two non-binding indicative proposals, first from Remus Horizons in December 2020 and later from Russia’s Lukoil in February 2021.

The proposal from Remus Horizons aimed to acquire all the shares in FAR at 2.1 cents per share, but the plot thickened further after FAR on 17 February 2021 also received a non-binding indicative proposal from Lukoil to acquire all the shares in the company at 2.2 cents per share.

In April 2021, FAR received a letter from Remus Horizons, confirming the private investment fund’s intention to make a takeover offer for FAR’s shares, but only a few days later, Remus recanted, explaining it would not be making a takeover offer after all due to a lack of funding.

This was the second takeover proposal, which fall through in a matter of 20 days due to Lukoil also deciding to abandon its previous intention of proceeding with a legally binding offer.