PERTH (miningweekly.com) – The directors of takeover target Warrego Energy on Monday confirmed that they would accept the takeover bid from fellow listed Beach Energy for their own shares in the company.
Beach and Warrego earlier this month entered into a scheme implementation deed, under which Beach is offering 20c a share in cash for each Warrego share held, as well as an additional scheme consideration should Warrego’s Spanish assets be sold within 12 months of completing the transaction.
The 20c a share offer for Warrego represented a 36% premium to the takeover target’s one-month volume weighted average share price, and a 14% premium to the company’s closing share price on November 19.
The Warrego board has unanimously recommended that shareholders vote in favour of the transaction, in the absence of a superior proposal and subject to an independent expert concluding that the scheme was in the best interest of shareholders.
The company said on Monday that the Warrego board had been actively looking to unlock value for shareholders which included investigating the possibility of a change of control transaction for Warrego for many months prior to entry into Beach’s offer earlier in November, and had granted non-exclusive due diligence access to a number of parties during that period, including Strike Energy and Beach, to enable them to put forward proposals for the company.
Strike had submitted a confidential, non-binding indicative all-scrip merger proposal to the Warrego board, offering 0.714 of its own shares for each Warrego share held.
Strike also offered to pay Warrego shareholders an additional scrip consideration for the company’s Spanish assets, if sold within 12 months of the transaction.
Warrego pointed out that it had been in discussions with Strike for nearly two months on the non-binding and indicative all-scrip proposal. During that period, Strike had revised its confidential and non-binding proposal a number of times, leading to its most recent proposal, which increased the exchange ratio from 0.7142 to 0.775 Strike shares for each Warrego share. Warrego had also undertaken reverse due diligence on Strike and its assets.
The takeover target noted that based on Strike’s closing share price of $0.25 on November 11, which was the last trading day before entry into the Beach agreement, Beach’s cash consideration was superior to the implied value of Strike’s proposed scrip consideration.
“In these circumstances, it is not credible for Strike to now claim that Warrego had rushed its assessment of Beach’s proposal, and had not adequately considered the relative merits of the Strike all scrip proposal against the Beach cash bid before doing so,” Warrego said in a statement on Monday, noting that its board had undertaken that process over an extended period, which included a detailed review of Strike's non-West Erregulla assets and liabilities.
“Importantly, the Warrego board's recommendation of the Beach offer is subject to no superior proposal being received. If a competing proposal is received, and the Warrego board forms the view that the competing proposal is a superior proposal to the Beach offer, then, subject to compliance with the provisions in the scheme implementation agreement, including Beach's matching right, the Warrego directors can change their recommendation to recommend that competing proposal. In these circumstances, Warrego would then be required to pay the 1% break fee to Beach,” the company added.
Addressing Strike’s argument that Beach’s cash proposal was finite and did not take into consideration the upside potential in the Strike share price, Warrego pointed out that Strike’s scrip proposal only implied value if Strike’s share price increased, but that Warrego shareholders would be exposed to a decline in Strike’s share price in the future.