Ann: Revised Harbour Energy proposal, page-19

I know the AFR used the term "bid against themselves" in an article a couple of weeks ago, but I absolutely don't understand why the whole auction analogy as arisen! To call Harbour's offer a "bid" is false and creates an incorrect understanding of what is happening and what the outcome is likely to be.

It's a negotiation between a prospective buyer and the current owner of an asset. Buyer makes an offer, seller considers the offer and does one of three things: accept, reject, or treat. It's a little more complex than that because the prospective buyer hasn't entirely committed to the offer, and have asked for more information about the asset in order to determine what they will be prepared to pay for it. In the meantime the board is treating with Harbour over what they regard as fair value.

As a shareholder I want to be remunerated for the current value of the asset, plus a component representing the present value of future capital growth that I will miss out on, plus a component for the present value of dividends that I will miss out on. A lot of the argument between the board and Harbour is (or should be if the board are doing their jobs) about what future capital growth and dividends are expected. The board will (or should) be pointing to the increasing price of oil, the debt reduction programme, and the likely return to dividend payments. Harbour will be pointing to the volatility of the oil market and risks to the price of oil, and to the lack of any dividends at all over recent time.

Bidding on the other hand is about competition between prospective buyers, and has nothing to do with the owner, which is a scenario completely unrelated to the one we're observing here.