Strike Energy says Warrego shareholders could double dip on takeover premiums with its offer

Strike Energy, now facing a much strengthened bid for Warrego Energy from Hancock, says shareholders should keep in mind that it too, will be in the sights of acquirers.

Strike Energy managing director Stuart Nicholls.

Strike Energy has warned shareholders in Warrego Energy that accepting rival bidder Hancock Energy cash bid places a “terminal value” on their shares, and cuts them out of a potential future takeover play for Strike itself.

Gina Rinehart’s Hancock on Thursday unveiled a new 36c per share bid for Warrego – subject to gaining acceptances for 40 per cent of its shares – up from its previous 28c per share bid.

Chris Ellison’s Mineral Resources is also understood to have been behind a significant buy up of Warrego shares this week, nabbing a 15 per cent stake, which, if combined with Hancock’s 25.91 stake, would push the Mrs Rinehart’s bid past its acceptance level.

Strike has also lost a major chunk of the acceptances which had previously been committed to its offer, with the company now saying it owns 19.9 per cent of Warrego stock with acceptances to buy another 10.68 per cent for a total of 30.58 per cent, down from 40.4 per cent previously.

Regal Funds Management, which owned a 9.8 stake in Warrego, sold to MinRes for 35c a share, flipping its allegiance from Strike.

A Mineral Resources rig drilling for gas in the Perth Basin.

Strike shares were trading 1c higher at 38.5c on Friday, valuing its one for one scrip bid higher than the Hancock cash bid. In the company’s bidder’s statement released on Friday, Strike said there was potential for shareholders to benefit from further share price upside if they accept its bid.

“Under Strike’s offer, Warrego shareholders will receive one Strike share per Warrego share, which will provide both ongoing exposure to Warrego’s existing assets and potential upside exposure to Strike’s majority owned and operated Perth Basin asset portfolio,’’ the statement read.

“This will allow Warrego shareholders to participate in the potential benefits of ongoing exploration success, the potential realisation of operational benefits and the potential rerating of the price of Strike’s shares as its Walyering gas project enters first commercial production in 2023.’’

Strike said the co-ordinated development of the Greater Erregulla region of the Perth Basin – where it is a partner with Warrego in the West Erregulla project – could benefit shareholders.

“Warrego shareholders will also retain exposure to the potential in the currently unexplored portions of West Erregulla whilst also gaining exposure from Strike’s ongoing exploration potential through its additional Perth Basin acreage … and entry into Strike’s unique net zero 2030, integrated renewables and energy platform across sustainable energy and fertiliser manufacturing,’’ the company’s statement said.

But it also noted the possibility it could be the target of a takeover play itself – something suggested by several brokers, who are expecting a wider consolidation of the Perth Basiin gas players, with MinRes moving on another local operator, Norwest Energy.

“There has been significant corporate interest for assets in the Perth Basin, evidenced by the numerous competing offers for Warrego,’’ the Strike statement reads. “The current macroeconomic environment has supported this growing enthusiasm due to elevated global energy prices, a short domestic WA gas position and a limited number of high-quality, near-term domestic gas projects following a period of meaningful under-investment.

“Strike believes there will be continued interest in strategic, high-quality assets in the Perth Basin, including those assets held by Strike.

“In the event Strike ultimately receives a change of control proposal, you may receive a further change of control premium on your Strike shares (in addition to the premium you are receiving for your Warrego shares in Strike’s offer). Conversely, by accepting Hancock’s current offer, you will not participate in any ongoing upside that may be realised.’’

Warrego closed down 0.5c, or 1.3 per cent, at 38c. The bidding war over the company, which had earlier included Kerry Stokes-backed Beach Energy, has seen the company’s shares rise 21 per cent in one month alone.

Originally published as Strike Energy says Warrego shareholders could double dip on takeover premiums with its offer