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Oil Search’s $US2.2 billion ($3bn) joint bid for InterOil with French oil major Total looks set for success, despite expected opposition from the target’s founder and significant shareholder Phil Mulacek.
As Oil Search’s deal-savvy managing director Peter Botten yesterday prepared to head to Papua New Guinea to try to smooth the path with stakeholders, Prime Minister Peter O’Neill publicly supported the deal and analysts said there was little chance of a better bid or Mr Mulacek getting enough support to vote the deal down.
Meanwhile, shares in the Canada-incorporated, Singapore-based, New York-listed target surged past the minimum deal price on Friday in the US, indicating that investors see value in contingent value rights linked to more gas being proved up at Papua LNG.
The complex joint bid involves Oil Search paying $US2.2bn in shares for InterOil and then selling down InterOil’s interest in the Papua LNG project to Total for about $US1.5bn.
Mr O’Neill said the deals should provide cost savings through co-operation of the Papua LNG project and ExxonMobil’s PNG LNG plant.
“This acquisition will provide cost savings and efficiencies for our nation’s greatest growth opportunities, which will directly benefit the people of Papua New Guinea,” Mr O’Neill said.
“These arrangements present a pathway to collaboration and possible integration of the projects, in which both Oil Search and the Papua New Guinea government would hold influential stakes.”
Mr Mulacek, who was replaced by current chief executive Michael Hession in 2013, is trying to overthrow the InterOil board at a shareholder meeting scheduled for June 14 in New York, citing underperformance of the company’s share price.
As of last night, he had not commented on the deal.
Raymond James analyst Pavel Molchanov said the two-thirds InterOil shareholder vote required to pass the deal should be easily obtained.
“We do not anticipate any difficulties with this approval, notwithstanding the current proxy fight involving InterOil’s former CEO,” Mr Molchanov said in a note to clients.
Oil Search has agreed to exchange 8.05 of its shares for every InterOil share, valuing the target at $US40.25. The deal will also see a contingent value right issued per Oil Search share, worth $US6.05 for every trillion cubic feet certified at Elk/Antelope beyond 6.02tcf.
In response to the bid, InterOil’s shares rose $US11.98, or 38 per cent, to $US43.63.
Oil Search shares fell 22c, or 3.2 per cent to $6.61 yesterday.

Courtesy of the Australian newspaper.