Warrego Energy says it fielded wide interest before accepting Beach Energy’s bid

Contrary to concerns raised at the company’s annual meeting, Warrego Energy says its acceptance of Beach Energy’s takeover bid came after a wide range of options were considered.

Warrego Energy has denied rushing into a takeover agreement with Beach Energy, 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 Energy, 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 Energy announced a 20c per share cash bid, which was considered by the Warrego board over the subsequent weekend and unanimously endorsed by the board on the 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 general meeting last week at which the Warrego board received a first strike vote against its remuneration report of 28.58 per cent, Warrego told the ASX on Monday 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,’’ the company said.

“Warrego rejects that suggestion.’’

The company said it had actually 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.

“As shown ... the Warrego 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 Strike’s shares, naturally 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.

“Those other Strike assets include Strike’s interest in the South Erregulla field, and its proposed fertiliser plant (which it calls Project Haber), which does not have financing and is at a conceptual stage only. There is no certainty that the development of these other assets will proceed.

“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 bidding war 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 recent 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 earlier 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.’’

Shares in all three companies fell on Monday, with Warrego stock 1.5c lower at 21c, Strike 0.5c down at 24.5c and Beach 2.5 per cent lower at $1.71.

Originally published as Warrego Energy says it fielded wide interest before accepting Beach Energy’s bid