AWE Ltd. (AWE), an explorer with shale fields in Australia and an oil project in Indonesia, rejected a A$752 million ($673 million) initial takeover proposal from Senex Energy Ltd. (SXY), saying it undervalued its shares.
Senex offered the equivalent of A$1.44 a share, 22 percent more than AWE’s closing price of A$1.185 on Dec. 12, Sydney-based AWE said today in a statement. Brisbane-based Senex, focused on oil and gas in central Australia’s Cooper Basin, withdrew its offer, according to a separate statement.
AWE, which rose the most in more than two years, would consider further potential offers “on their merit,” Managing Director Bruce Clement said today in a phone interview. The company, which aims to double output and triple cashflow by 2017, has shale gas assets in the Perth Basin of Western Australia and an Indonesian project with partner Santos Ltd.
“We do not think that there is necessarily a compelling fit between AWE’s and Senex’s businesses,” John Young, an analyst at Ord Minnett Ltd. in Melbourne, said today in a note.
AWE rose 7.2 percent to A$1.27 in Sydney, while Senex fell 8.4 percent to 70.5 cents. Australia’s benchmark S&P/ASX 200 Index declined 0.2 percent.
The company has a clear growth strategy and will look at acquisitions and expansion opportunities, Clement said.
“We recognize the potential to add value,” Clement said. “While we remain confident in what we are doing as a company, we will consider offers.”
Senex offered 1.9 of its shares for every AWE share, which would have resulted in Senex shareholders getting 53 percent of the combined company and AWE holders getting 47 percent, according to the AWE statement.
“While the board of AWE recognizes the potential to add shareholder value through material M&A transactions, it remains confident of the company’s ability to create further value for shareholders through the ongoing commercialization of AWE’s existing portfolio of opportunities,” AWE said.
The main attractions of AWE are its West Australian gas fields and its oil development in Indonesia, Nik Burns, a Melbourne-based analyst at UBS AG, said Dec. 13 by phone. AWE is also set to benefit from rising gas prices on the east coast of Australia, where the company is a partner with Origin Energy Ltd. (ORG) on the BassGas project, he said.
Under the Senex bid, AWE said it would have contributed a significantly greater share of reserves, production and revenue with less than half the combined company’s equity.
Senex viewed the bid for AWE as a way to bring together three “key onshore” areas, the Perth and Cooper basins in Australia and the Eagle Ford formation in the U.S., Managing Director Ian Davies said today in a phone interview.
A$1.5 Billion Combination
Senex, which also has coal-seam gas acreage on the east coast of Australia, isn’t exploring any further acquisitions and has a “self-sustaining business,” Davies said.
AWE had fallen 2.5 percent this year in Sydney before today. The benchmark S&P/ASX 200 Index rose 9.7 percent and Senex gained 11 percent over the period.
AWE last month completed the sale of half of its project in Indonesia, including the Ande Ande Lumut development, to Santos for $188 million. In May, it boosted its estimate for the oil project’s recoverable oil by 33 percent.
A combination of the two would create a company with a market value of about A$1.5 billion, providing “scale and increased production diversification for Senex, but little in the way of operational synergies,” Ord Minnett’s Young said.
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