Takeover tussle for Warrego Energy entering end game

The takeover battle for Warrego Energy is likely to come down to a handful of institutions’ preference for either cash or scrip.

MinRes also has its own scrip bid for fellow Perth Basin gas player Norwest Energy on foot. Picture: Mineral Resources

The takeover battle for Warrego Energy is likely to come down to a handful of institutions’ preference for either cash or scrip, with the two contenders for the company – Hancock Energy and Strike Energy – both stalled at levels that won’t hand them full control.

Trading in Warrego stock was muted on Wednesday, with just 1.8 million shares changing hands against an average volume of about 6.5 million.

The share price is sitting bang on the Hancock cash offer of 36c a share, well below highs of 41.5c hit in January, as the takeover tussle – which kicked off with Strike and Beach Energy going head to head in early November – enters what could be its end game.

Beach dropped out of the running in December, leaving Hancock’s 36c per share bid and Strike’s 1-for-1 share offer on the table. Complicating matters is the 19.2 per cent stake picked up by billionaire Chris Ellison’s Mineral Resources, which if handed to either bidder would prove pivotal, but which MinRes is adamant was picked up as a “strategic stake’’.

MinRes also has its own scrip bid for fellow Perth Basin gas player Norwest Energy on foot.

Gina Rinehart's Hancock this week extended its scrip bid to Friday, February 10, with shareholders who accept that offer to be paid should acceptances hit 40 per cent. With Hancock saying this week that it had a statement of intent from Beryl Capital Management for about 4.3 per cent of Warrego’s stock, it is understood it now has ownership and agreements accounting for a figure in the low-30 per cent range of the target. Strike is sitting at slightly more than 21 per cent.

It is understood that several institutions that were on the register before the bidding war began or have bought in during the process control enough stock to seal the fate of either bid, with their preference for either taking their money off the table with the Hancock cash offer, or letting it ride with ownership of Strike scrip the key decision to be made.

Credit Suisse analyst Saul Kavonic said it could end up in a stalemate. “MinRes may stay on the register and leverage its swing vote to extract value and synergies with its business. Strike’s shareholding and operatorship of West Erregulla could frustrate Hancock and MinRes’s ambitions for the WGO assets. This could lead to protracted commercial jostling and there are a number of ways that plays out, but one of the simplest solutions could be more M&A consolidation that sees Strike become a target.’’

Strike and Warrego are joint venture partners in the West Erregulla gas project in the Perth Basin. Hancock is keen to lock in gas supplies long-term for its WA mineral development aspirations. Strike shares closed on Wednesday at 36.5c, up 2.8 per cent, and traded as high as 40.5c last month.

Strike managing director Stuart Nicholls said on Wednesday the lack of a resolution could result in a “tripartite’’ ownership structure that would not help the other two with gas supply aspirations.

Originally published as Takeover tussle for Warrego Energy entering end game