Gina Rinehart raises the stakes against Beach Energy with a higher offer for Warrego
The fight for control over Warrego Energy took another twist late on Friday when Hancock Prospecting upped its offer to 28c a share.
A tussle between Kerry Stokes and Gina Rinehart over West Australian oil and gas producer Warrego Energy has accelerated after the businesswoman lobbed a 28c-a-share bid late on Friday.
Mrs Rinehart’s Hancock Prospecting is vying for the Perth Basin operator against ASX-listed Beach Energy, backed by Mr Stokes.
Beach had earlier on Friday bid 25c a share for the company as it attempted to convince Warrego’s board and shareholders not to support the Hancock offer, which had originally come in at 23c a share.
A bidding war for the company broke out after ASX-listed Strike Energy, its joint venture partner in WA, made a scrip-based bid that would not value Warrego at above 20c a share. However, both the Strike and Beach offers are more complex than that from Mrs Rinehart, which the board favours.
The Beach bid will also include proceeds from the sale of a Spanish asset owned by Warrego, although that proposal will require significantly higher shareholder support.
In a statement, Hancock said its bid had “no risk of any future sale of non-core assets in Spain, which is uncertain and out of shareholders’ control”. “Hancock … notes that its increased offer represents a 104 per cent premium to Warrego’s six-month volume-weighted average price on the last full trading day prior to the recent announcements of control proposals,” the statement reads.
Warrego shares rose 2.2c, or 8.5 per cent, to close at 28c. They have more than doubled in one month.
Strike was initially confident its bid was a winner, telling the ASX in a statement that the Warrego board “intended to unanimously recommend a merger between the two companies’’. But the Warrego board did no such thing, and late the next day, on November 11, Beach lobbed a 20c-a-share bid, which was endorsed by the board by the following Monday.
The prized asset being fought over in the battle for Warrego is its West Erregulla venture with Strike, where it announced a 41 per cent reserves upgrade in July. Strike told the ASX in November that it believed there was further “high impact and low-risk upside resource potential’’.
The bidding war for Warrego kicked off speculation that a consolidation of all players in the Perth Basin was in the offing, with analysts suggesting Strike would be a target, and potentially Beach as well. This has at times pushed Strike’s offer past the Beach bid. Strike shares rose 6.7 per cent, or 2c, on Friday to close at 32c.
Perth Basin players Norwest Energy and Talon Energy also saw some strength on Friday, with Norwest up 2 per cent at 4.8c and Talon 6.3 per cent higher at 17c.
The Hancock bid has fewer conditions attached than the other offers, with shareholders to be paid within 10 days of acceptance.
Credit Suisse analysts told clients the interest in Warrego was “reflective of appetite by strategic buyers for low-cost gas near infrastructure amid a tightening WA gas market”. While Beach has synergies with its neighbouring assets, “Hancock may have use for gas in its mining operations (and partner POSCO in Senex may also have interest in gas for steel,” they said.
“While the higher bid price is not material to Beach, the increased Beach offer reinforces our question, is Beach also after Warrego to manage downside Waitsia reserves risk,” they added.
Mrs Rinehart’s Hancock delivered its second-largest financial result in its history, The Australian revealed this week, producing a bumper $5.8bn net profit.
Hancock’s overall net profit fell from a record $7.3bn result last year, though the drop was due to falling iron ore prices, according to documents lodged with the financial regulator this week. The company’s 2020 profit was $4bn.
This article has been updated to note that Kerry Stokes, not Andrew Forrest, is the major shareholder in Beach Energy.