arbitrage, page-11

For those who have not read it, this is the West Australian article to which Rager refers:-

Funds cast doubt on Tullow’s Hardman tilt
8th December 2006, 8:15 WST

Irish oil producer Tullow Oil’s $1.5 billion friendly takeover bid for Perth-based Hardman Resources may be headed for stormy seas when shareholders vote on the deal next month, following steady buying by major institutions above the $2.02 offer price in London.

Hardman yesterday revealed Deutsche Bank had boosted its stake to 7.15 per cent after picking up an extra 12 million shares on market over the past fortnight.

Deutsche’s move follows similar buying by other institutional investors in recent weeks, including JPMorgan (6.07 per cent), UBS (6.86 per cent) and Newton Investments (5.43 per cent).

In June, three months before Tullow’s bid, Merrill Lynch took a 9.6 per cent stake in the company at the height of investor fury over ongoing problems at the $1 billion Chinguetti oil project in Mauritania which pushed Hardman shares as low as $1.19.

Together, the five institutions now speak for more than 35 per cent of Hardman’s shares, giving them the power to vote down the proposed scheme of arrangement at the December 18 shareholder vote. The merger can only proceed if a 75 per cent majority of shares voted approve the deal.

Analysts said while it was unlikely that a rival bid would emerge to gazump Tullow, the institutions might be preparing to pressure Tullow into lifting its price. Similar action by investment banks last year forced Cleveland-Cliffs to lift its offer for WA iron ore miner Portman.

The recent institutional buying, comes amid significant exploration progress by Hardman that has partly eased the pain of the problems at Chinguetti, where reserves have been slashed by 57 per cent and production has fallen two-thirds because of the failure of two key production wells. This week, Hardman revealed the first infill well aimed at boosting production at Chinguetti by about 10,000bpd would be completed next month, while the Aigrette-1 well to the north had confirmed that oil was present in Mauritania’s northern waters.

Hardman has also enjoyed better than expected success at its Ugandan joint venture with Tullow, and in the past month has secured Gaz de France as a partner at its vaunted Guyane project in South America.

JOHN PHACEAS