Article by Elouise Fowler courtesy of the Australian Financial Review.
Senex Energy has ended its 37-year stint on the ASX boards, with a majority of shareholders approving the $900 million takeover of the east coast oil and gas company amid the global turmoil in energy markets.
But at the meeting in Brisbane on Tuesday, a group of disgruntled investors asked why they should accept the $4.60 a share offer when the price of oil has surged to its highest level since 2008 and is likely to climb higher following Russia’s invasion of Ukraine.
Gina Rinehart’s private company will contribute $440.89 million to buy 49 per cent of Senex. Bloomberg
Trevor Bourne, Senex’s chairman, told shareholders soaring oil prices were not a sign that the value of Senex had increased, backing in his point with the fact no suitors with higher offers had emerged to counter the bid from the consortium led by PIC, a subsidiary of New York and Korean-listed Korean steelmaker Posco, and Gina Rinehart’s Hancock Energy.
“If some smart person thought that the war in Ukraine was having a major long-term change to the value of energy companies, then we’d have another bid turn up. This bid has been in the market for more than four months and no one’s approached us,” Mr Bourne said.
A shareholder responded: “The war has only been going for a few weeks, a lot can change.”
Others chimed in to ask, “Because of what Putin [Russian President Vladimir Putin] is doing, shouldn’t we get a better offer?”
Mr Bourne insisted the value of the company, which operates Roma North and Atlas Projects in the western Surat Basin in Queensland, was unlikely to change, saying the “market was well across it” and “this sort of volatility is well understood”.
But he conceded it was possible to argue “the premium that we’re getting today is not quite the premium of November or December”.
“However it is still a substantial premium. No shareholder who has bought a share in the last five years is doing anything but quite well out of it,” he said.
At the end of February, the price of Brent crude spiked to $US139 a barrel, its highest level since 2008, and analysts say the price could reach as high as $US185 a barrel as countries give Russian oil the cold shoulder at a time when the market is already in short supply. The price has since dropped to $US103 a barrel on Tuesday.
A hefty 328 shareholders, or 23.6 per cent, voted against the offer. But a majority ultimately backed the buyout, which received 1058 shareholder votes or 76.1 per cent, clearing the legally required 50 per cent threshold for takeovers by scheme of arrangement.
The independent expert report had warned some shareholders bullish about long-term oil and gas prices might view the offer as “inadequate” in its report on 8 February, before Russia’s invasion of Ukraine.
But ultimately the expert report deemed any proposal between $4.17 and $4.92 a share “represent[ed] an appropriate premium to the recent market prices of Senex shares”.
The consortium is led by Posco, which will stump up $442.66 million to buy 50.1 per cent of the company. Gina Rinehart’s private company will contribute $440.89 million to buy the remainder. The consortium transaction will be made via K-A Energy 1, a holding company.
A raft of proxy advisers told Senex shareholders the bid was in line with the independent expert’s recommendation.
CGI Glass Lewis’ report, dated March 3, said Senex Energy’s bid at 10.9-times EBITDA was nearly twice the average trading multiple of its peers as at December 13 last year, when the scheme of arrangement was signed and announced.
ISS said a vote for the proposal was warranted given the 20.4 per cent premium, all-cash consideration, the independent expert’s valuation at $4.17 to $4.92, market reaction post the deal and the fact no superior offers had emerged.
Ownership Matters also told clients to vote for the bid, in line with the board recommendation.
The second court date to approve the scheme will be held on March 18, with takeover set to be implemented by 1 April.
