AWE in bidding duel as Mineral Resources enters fray

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AWE in bidding duel as Mineral Resources enters fray

By Cole Latimer

AWE has received its third takeover bid in two months, with Australian mining company Mineral Resources making a $484 million offer for the gas company.

Mineral Resources' 100 per cent scrip offer, which values AWE at 80¢ a share, is not conditional on due diligence.

Mineral Resources is offering one new Mineral Resources share for every 22.3325 AWE shares.

Mineral Resources is offering one new Mineral Resources share for every 22.3325 AWE shares.

The offer would see AWE shareholders collectively become one of the larger shareholders in Mineral Resources, owning about 13.1 per cent of the combined group.

Mineral Resources said the acquisition was part of its strategic push into oil and gas.

“The acquisition of AWE fits within Mineral Resources’ clean energy strategy of securing gas assets to vertically integrate the energy supply chain, including the use of LNG plants to provide power solutions to a wider range of end users,” it said in a statement.

A source close to the process told Fairfax Media Mineral Resources' belief it did not require due diligence demonstrated a high level of confidence in AWE and its assets.

The bid was made after the close of trading on Friday, just hours after Chinese state-owned firm China Energy Reserve and Chemical Group lobbed a revised offer of 73¢ a share, or $463 million, after it withdrew its initial offer of 71¢ a share.

Although AWE did not reject the initial offer outright, its board said at the time its “initial reaction is that the indicative proposal is not sufficiently attractive to provide access to due diligence".

CERCG withdrew its first bid before AWE’s board was able to finish an assessment of the proposal, before coming back with the slightly higher offer.

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Fat Prophets analyst David Lennox said the latest offer of nearly half a billion dollars demonstrated the increased attractiveness of Australian domestic gas suppliers.

“It’s about the supply of domestic gas into Australia, they’ve caught the market’s eye, given the shortage of gas on the east coast,” Mr Lennox said.

This focus on domestic gas was confirmed by Mineral Resources.

“Mineral Resources does not currently intend to sell any gas from AWE’s Waitsia gas project offshore as it is committed to supplying domestic gas in Australia and is a large consumer of domestic gas in its own right,” the company said.

CERCG Australia business manager Kevin Gao also put domestic supply opportunities as a cornerstone of its acquisition.

"The acquisition of AWE will enable us to build on our vast operational experience to launch a successful domestic gas business in Australia by linking Australian gas resources with customers across Australia," Mr Gao said.

Despite CERGC’s early aggressiveness in bidding, Mr Lennox was uncertain whether the Chinese firm would return with an offer to counter Mineral Resources.

“If CERCG put in a revised bid of 73¢ fairly quickly they will look at this new offer, but it’s hard to say if they would counter it,” he said.

“If they really wanted AWE then they would have come back with a revised offer higher than an extra 2¢ a share, something with more meat behind it like 75¢ a share.”

However, this does not mean Mineral Resources' bid is a certainty.

"We don't know if an 80¢ all-scrip offer is enough to win the day either," a source close to the process said.

"The board does not seem to be favouring one or the other at the moment. Both offers need to be sharpened a few degrees more."

Mr Gao noted the announcement of the rival offer, stating that his business' cash offer provided greater shareholder security.

"Our all-cash offer means certainty of value for AWE shareholders.  Our cash offer can be executed and delivered to AWE shareholders more quickly than a scheme," Mr Gao said.

"Shareholders can then deploy or reinvest their cash proceeds as they see fit, according to their own needs and investment risk profile."

Fat Prophets analyst David Lennox said the race for AWE might also shine a light on similar Australian domestic gas suppliers such as Beach Energy.

“This really opens up other companies in that sector, Beach Energy would be brought into the market’s gaze and companies looking at Australian domestic players,” he said.

AWE’s board stated that its shareholders should take no action on either CERCG or Mineral Resources’ bids until it provided a full recommendation.

AWE has appointed UBS and Highbury Partnership as its financial advisers, and Allens as its legal adviser.

AWE closed the day up 15 per cent, at 84¢.

Mineral Resources shares finished the day down 8.34 per cent from an opening price of $17.45, finishing the day at $16.37 a share.

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