AWE’S takeover rollercoaster

MINERAL Resources (Minres) has trumped China’s offer to purchase gas producer AWE with a last minute all-in scrip offer of 80 cents per share. China Energy Reserve and Chemical Group (CERCG) had made an increased $463 million counter-offer for AWE, days after an initial $430m takeover offer was rejected by the energy producer. AWE, which is developing the highly prospective Waitsia onshore gas field in the Perth Basin, received an initial offer of 71 cents per share, significantly higher than its 54.5 cents 30 November closing price. CERCG however said it would only proceed with a formal offer if it was able to conduct a review of AWE’S assets. In a leaked letter to the AWE board dated the week of the offer, CERCG managing director Liping Xuan cited concerns over about a final investment decision (FID) for Waitsia’s second-stage development because of AWE’S inability to secure sales contracts and expiration of production licenses. AWE subsequently announced to the market it would reject the initial offer, and CERCG withdrew. “The AWE board remains fully committed to acting in the best interests of, and maximising value for, AWE’S shareholders,” the company said at the time. RBC Capital Markets oil and gas analyst Ben Wilson said he was not surprised to see the initial bid withdrawn. “The manner in which the indicative bid was rebuffed, specifically making the bid letter public in the context of keeping possible SPP investors fully informed, possibly impacted the bidder’s appetite to push ahead,” Mr Wilson said. Days later, CERCG returned to the negotiating table with a direct cash offer of 73 cents per share, stronger than its initial conditional approach for the company. However on 11 December – in what may spark a bidding war – Minres swooped in with its own offer, valuing the company at $507m. Minres said the acquisition of AWE would fit in with its clean energy strategy of securing gas assets to vertically integrate its supply chain, and would not export any production. “Minres does not currently intend to sell any gas from AWE’S Waitsia gas project offshore as it is committed to supplying domestic gas in Australia and is a large consumer of domestic gas in its own right, with such consumption to grow considerably as [the company’s] previously announced processing and infrastructure projects come on line,” the company stated. Waitsia, 50 per cent owned by Lattice Energy, is expected to undergo a FID early this year. Before the takeover offers, AWE managing director David Biggs had described Waitsia’s latest well as the highest onshore conventional gas flow ever recorded in Australia.