Despite withdrawing the initial takeover offer for the Australian oil and gas company Awe, the Chinese are not giving up.
The China-state run company CERCG has now relaunched a takeover bid of a $0.73 per AWE Share. The bid is an increase compared to the one from November which was $0.71 per share. The initial bid was dismissed by AWE, which deemed it not attractive enough.
However this time the company is going directly to the shareholders with an off-market bid.
In a statement on Friday CERCG said: “CERCG Australia has been in discussions with AWE for the past two months about acquiring AWE and has endeavored to engage on a friendly and collaborative basis. Following unproductive engagement with AWE’s Board, CERCG Australia has now decided to make a direct offer to AWE Shareholders. This decision also follows encouragement from AWE Shareholders for CERCG Australia to do so.“
Announcing the new bid, CERCG said the shareholders would, based on closing price on November 29, 2017 get a significant premium if they accept the offer.
The offer is 33.9% premium to the closing price of AWE Shares of $0.545 per Share, and 36.8% premium to the 30-day VWAP of AWE Shares of $0.5335 per Share.
The offer values AWE at approximately $463 million on a fully diluted basis.
Failing to deliver
The Chinese company, offering to takeover AWE via its Australian subsidiary, has accused AWE of consistently failing to deliver acceptable shareholder returns, erosion of shareholder value, and underperformance to peers.
Managing Director of CERCG Australia, Liping Xuan, said: “We are pleased to make this Offer directly to AWE Shareholders which provides them with the opportunity to lock in certain all cash value at an attractive price while removing the significant operational and market risks associated with AWE. We are also pleased that AWE Shareholders, who are the ultimate decision makers, will have an opportunity to realize compelling value for their Shares.”
AWE is an independent oil and gas company with offshore and onshore oil and gas operations in the Asia Pacific region.
The Chinese company is particularly interested in AWE’s Waitsia gas field near Perth, Australia.
“Despite AWE’s significant erosion of shareholder value and underperformance to peers, CERCG Australia acknowledges that the Waitsia Gas Field, and its increasing 2P Reserves and future development, has the potential to return value to AWE Shareholders in the longer term,” the Chinese company said.
“It is for this reason that CERCG Australia is prepared to pay such a substantial premium for AWE. This substantial premium recognizes future but uncertain value. CERCG cautions Shareholders that meaningful positive cash flow from Waitsia is not expected until at least the back-end of calendar year 2020, some three (3) years in the future,” it said.
Take no action
AWE Limited, the target company, noted the “unsolicited conditional off-market takeover bid” for AWE at $0.73 per share, and has urged shareholders to take no action in relation to the offer or “any document received from CERCG Australia until they receive the AWE Board’s formal recommendation.”
“The AWE Board will evaluate the offer and provide shareholders with a recommendation in due course. The AWE Board will keep shareholders and the market informed of further
developments and provide a formal recommendation on the bid in time for shareholders to make an informed decision on how to deal with the bid.”
AWE has appointed UBS AG, Australia Branch, and Highbury Partnership as financial advisors and Allens as legal advisor.