Article by Brad Thompson & Angela Macdonald-Smith courtesy of the Australian Financial Review.
Gina Rinehart has hit back in the takeover battle for Warrego Energy and cast doubt on rival Strike Energy’s capacity to fund its onshore gas ambitions in the Perth Basin.
Mrs Rinehart’s Hancock Energy maintains its all-cash 28¢ per share takeover offer for Warrego is superior to a revised bid lobbed by Strike on Monday.
Hancock, which has pointed to a near $18 billion cash war chest to fund a Warrego takeover, other acquisitions and project developments, warned Strike would need to go deep into debt under its “high risk” Perth Basin plans.
Hancock chief executive Stuart Johnston said Warrego shareholders needed to consider the certain value of the cash offer compared with the risks inherent in a scrip offer from Strike.
Strike sweetened its all-scrip offer on Monday in a rapid-fire takeover battle that has already seen six bids from three parties lobbed since last month.
The battle has lit a fire under the Warrego share price and that of Strike, its partner in the West Erregulla gas project.
In a revised bidder’s statement issued on Tuesday, Hancock said its offer provided greater certainty for Warrego shareholders and was substantially higher than the value of Strike’s scrip bid based on a “steady state” trading price of 24.7¢ over the past three months.
The standing Hancock offer was enough to knock Kerry Stokes-backed Beach Energy out of the race for Warrego but not Strike.
Strike bypassed the Warrego board on Monday with a direct offer of one of its shares for each Warrego share.
The latest Strike offer implied a price for each Warrego share of 33.5¢ based on Strike’s close on Friday, and valued the Warrego at about $409 million.
Warrego shares were trading at 31.5¢ on Tuesday with Strike shares hovering around 33¢.
Complicated path
There is speculation, supported by some big Warrego shareholders, that Hancock could opt to make a bid for Strike depending on how determined it is to control and develop onshore gas supply from the Perth Basin.
The road to Hancock securing Warrego is complicated by Strike holding a 19.9 per cent blocking stake.
Phil King’s Regal Funds Management, which has a 9.8 per cent stake, and two smaller but significant Warrego shareholders have said they intend to back the Strike bid in the absence of a superior proposal.
Hancock’s latest bidder’s statement takes aim at Strike over a $153 million financing package with Macquarie Bank announced alongside its revised scrip bid on Monday, intended to support its gas development ambitions.
Hancock said Strike faced funding challenges, onerous debt arrangements and cast doubt on its ability to meet a list of approval and project milestones required under the terms of the Macquarie deal.
Mrs Rinehart’s privately owned energy division said some of Strike’s plans were “high risk”, including an unfunded proposal to build a fertiliser plant with a price tag of $3 billion to $3.5 billion.
Billionaire Chris Ellison told The Australian Financial Review last week that there was scope for his Mineral Resources to cooperate with Mrs Rinehart, Australian richest person, and Hancock Energy in the Perth Basin.
He was speaking after Mineral Resources launched a $403 million takeover bid for Norwest Energy that would give MinRes total control of the Lockyer Deep project that Mr Ellison wants to use to provide cheap gas for downstream processing in resources-rich WA.
On Tuesday, Norwest advised its shareholders to take no action at this stage in response to the MinRes scrip bid.
The Norwest board said it didn’t intend to make a recommendation on the offer until January.
Norwest managing director Iain Smith said the unsolicited offer from its Lockyer Deep joint venture came on the cusp of a “transformational drilling and seismic campaign which aims to prove up Australia’s largest ever onshore conventional gas field”.
“Mineral Resources stands to benefit considerably, including as an end-user, if it is able to consolidate ownership of Norwest’s assets to secure full control against a backdrop of an increasing WA domestic gas price, the possibility for export and the creation of new downstream industries,” he said.
