PERTH (miningweekly.com) – ASX-listed Senex Energy on Monday flagged change of control discussions with POSCO International Corporation.

The company told shareholders that POSCO International in early September submitted a revised non-binding and indicative proposal to acquire 100% of Senex for a cash offer price of A$4.40 a share, following the submission of two prior non-binding proposals in July of A$4.00 a share, and in August of A$4.20 a share.

The Senex board met and carefully considered this revised proposal and the prior proposals, including consulting with external advisers. On September 15, Senex granted POSCO International a period of exclusivity in order to complete their due diligence enquiries and further advance the proposal.

Following further discussions between the parties, Senex has now agreed to extend POSCO International’s exclusivity period to November 5, in order to provide the suitor with additional time to assess a further revised proposal at a price higher than A$4.40 a share.

The revised proposal offer price represents a 40% premium to the 30-day volume-weighted average price on September 2, being the date prior to the receipt of the revised proposal, and represents a 19% premium to the 30-day volume weighted average price on October 15.

POSCO International has indicated that if a transaction proceeds, it is likely to be implemented by way of an off-market takeover offer which would be subject to a 50.1% minimum acceptance condition and Foreign Investment Review Board approval, however, the transaction would not be subject to a financing condition.

Senex told shareholders on Monday that it would be in the best interest of shareholders to continue to engage with POSCO International and that the company will assess any proposal received on its merits.

Senex has appointed Macquarie Capital and Rothschild & Co as financial advisers and Clayton Utz as legal adviser.

Advisory firm Wood Mackenzie said on Monday that an acquisition of Senex provides POSCO with exposure to Australia’s east coast gas market at an opportune time.

“The Australian east coast supply:demand outlook is precariously balanced, and a lack of new supply sources is expected to lead to rising prices,” said analyst Michael Song.

Research director Angus Rodger said that POSCO’s existing portfolio is heavily weighted towards Myanmar and the producing Shwe gasfield. However, the company has come under considerable pressure following the country’s military coup and has already halted other business interests in the country. 

“This move by POSCO highlights several key trends in the upstream space. Firstly, the growing role of ‘other’ buyer types in the upstream merger and acquisition (M&A) space, particularly conglomerates, traders, miners, and utilities. Secondly, the attractiveness of gas, particularly in supply-constrained areas such as Eastern Australia. And lastly, the importance of a large, diversified portfolio to increase resilience and manage a growing range of industry risks.”  

Song added that M&A activity in Australia’s upstream space has heated up in 2021 following the mega-mergers of Woodside and BHP Petroleum, and Santos and Oil Search.

“Although smaller in scale, if POSCO’s move is successful it will be the largest corporate takeover in the Australian upstream sector since 2018, when Santos acquired Quadrant Energy for $2.1-billion.”