Gina Rinehart’s Hancock Energy has upped the ante in the takeover battle for Warrego

Warrego Energy shares have rocketed after Gina Rinehart’s Hancock Energy lobbed yet another takeover bid at the company.

Resources and agriculture entrepreneur Gina Rinehart.

Gina Rinehart’s Hancock Energy has launched a competing takeover bid for Warrego Energy — the third currently on the table — trumping Beach’s offer and sending the target’s shares higher.

Beach Energy’s 20c per share cash bid has now slipped to third place in terms of value, with Strike Energy’s scrip bid, the first announced to the market, soaring past it on Wednesday as that company’s shares also went on a run.

Hancock is urging Warrego shareholders to accept its 23c per share offer immediately, and says it beats Beach Energy’s 20c per share bid on a number of fronts.

The new bid, Hancock says, includes consideration for the company’s Spanish assets, which Beach intends to sell post-acquisition, with that money then flowing back to shareholders — something Hancock says may never eventuate.

Hancock says its offer will not be subject to a Warrego shareholder vote, has no minimum acceptance level, and shareholders who accept the off-market bid will receive their money within 10 days.

The company said it had been engaging with the Warrego board on a confidential basis, but those talks had now ceased.

Beach’s bid, announced late on Friday, November 11, had trumped an earlier scrip bid from Strike which is a joint venture partner with Warrego.

Warrego shares closed more than 15 per cent higher on Wednesday, up 3.5c at 25.5c. Strike shares also gained 16.3 per cent, up 4c to 28.5c, with some analysts predicting a Perth Basin consolidation play could be on the cards.

The jump in Strike shares also pushes its scrip bid to a value of 22.1c per share, past the value of Beach’s cash offer.

Warrego is currently endorsing the Beach bid, and is yet to respond to the new offer.

The new offer from Hancock waives a number of conditions commonly associated with takeover bids, such as the “the material adverse change condition’’.

“The low level of conditionality of Hancock’s offer should provide Warrego shareholders with a higher level of certainty that they will be paid the offer price for their Warrego shares following their acceptance of the offer,’’ the bidder’s statement lodged with the ASX says.

The Hancock offer is scheduled to close on January 31 next year.

Warrego earlier this week issued a statement to the ASX denying it had rushing into a deal with Beach, revealing it had opened its books to a number of parties in the lead-up to the current tussle for control of the company.

Strike, which is a joint venture partner with Warrego in the West Erregulla project in Western Australia, revealed a scrip bid for the company on November 10, which it believed the Warrego board would back.

Late the next day Beach announced a 20c-per-share cash bid, which was considered by the Warrego board over the weekend and unanimously endorsed on Monday morning.

Fluctuations in the Strike share price have at times pushed its bid past the value of the Beach offer, and it has also warned Warrego shareholders they will miss the option to potentially claim rollover tax relief if the Beach cash bid goes through.

Following an annual meeting last week at which the Warrego board received a first strike vote against its remuneration report, the company on Monday said its board continued to support the Beach bid.

“At the Warrego AGM, suggestions were made by certain shareholders, including a representative of Strike Energy that the Warrego board had not spent sufficient time assessing the Beach proposal, and may not have adequately considered the relative merits of the Strike all- scrip proposal against the Beach cash bid,’’ it said. “Warrego rejects that suggestion.’’

The company said it had been investigating a potential “change of control transaction’’ for the company for “many months’’ before striking the deal with Beach, “and had granted non-exclusive due diligence access to a number of parties during that period, including Strike and Beach’’.

During this period it had been negotiating with Strike, which had increased its scrip offer a number of times, eventually from an initial 0.7142 shares to 0.775 shares, while it had also been talking with Beach, which increased its own starting bid from 17c to 20c per Warrego share.

“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. “(The) board had undertaken that process over an extended period, which included a detailed review of Strike’s non-West Erregulla assets and liabilities.’’

The Warrego board also pointed out that the company was effectively still in play.

“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 deed, including Beach’s matching right, the Warrego directors can change their recommendation to recommend that competing proposal,” the company said.

The Warrego announcement said while Strike’s offer included potential upside from exposure to shares, that came with risk.

“It is also important to note that, under the Strike proposal, Warrego shareholders would be taking exposure to Strike’s other assets … There is no certainty that the development of these other assets will proceed,” it said.

“Having considered the upside and downsides of the Strike scrip proposal and Beach’s cash proposal, on balance, the Warrego board determined that the Beach proposal provided an attractive offer for all shareholders due to the cash value being offered as well as the certainty of the value of that cash at the time of completion of a transaction.’’

The struggle for Warrego has kicked off speculation that a bidding war for companies with Perth Basin assets has begun, while Beach managing director Morne Engelbrecht was at pains to tell his own company’s AGM that a tilt for Strike itself was not being considered. “We have no intention to make an offer for Strike Energy,’’ Mr Engelbrecht said this month “If you apply our Warrego offer on a look through basis to Strike’s 2P (gas) reserves you’ll realise we believe Strike is not something we would acquire at its current share price.’’

Originally published as Gina Rinehart’s Hancock Energy has upped the ante in the takeover battle for Warrego