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CERCG maintains, in theatre unconvincing, that this is a friendly takeover of AWE.
by Matthew Stevens
The immediate future of AWE Limited is expected to become even more complicated this week with speculation gathering that the half-owner of Western Australia's exciting Waitsia gas discovery might be delivered a second takeover offer as early as Monday.
But, the way we hear it, the game had already moved on ahead of CERCG's return of serve with a second suitor having already made contact with the AWE board with an offer pitched a little bit north of 80¢ a share.
From the moment AWE revealed CERCG's approach there has been discussion about who else might want to offer value for what is an onshore gas find of rare size and proximity to markets. Some of the names mentioned in dispatches include WA locals Mineral Resources, Woodside Petroleum and Beach Energy.
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Given AWE is now in play, Beach has both defensive and offensive motivation to contemplate a material response and the most obvious currency for any offer could well the expanding driller's currently very buoyant scrip.
And what of that motivation?
Well, we hear that Beach is as excited by the known unknowns of the Waitsia discovery as it is about the resource already revealed. And we hear, too, that the Beach board and management is more than a little chary about the possibility that its new WA gas bounty might be operated by a relatively obscure Chinese entity that is totally new to the Australian energy environment.
If we discount the possibility that Woodside might run its eye over a Waitsia future, then the next most likely of those three candidates had to be Mineral Resources. Managing director and 13 per cent shareholder, Chris Ellison, has made plain his interest in energy and transforming MinRes into an integrated resources house.
To refresh here, AWE is operator and 50 per cent owner of the Waitsia gas project and it is the biggest onshore gas discovery made in Australia for 40 years with a resource profile that is already largely de-risked and that has potential yet to grow in significance.
The AWE board deemed this pitch too slight to entertain either the rapid-fire due diligence and the procedural exclusivity demanded by CERCG.
Talks over value continued for a couple of days after the original proposal wasp publicly dismissed just two days after it was offered. But progress was apparently too slow for CERCG and by Tuesday last week the Chinese gas compressor and logistics operator had withdrawn in a faux huff over AWE decision to disclose China Inc's intent.
Few were convinced by CERCG's theatrical anxiety, so Friday's return to the fray with a slightly increased offer of 73¢ a share generated little or no surprise. That the market responded immediately by driving AWE's price to match that 73¢ says that the driller is firmly in play and that short-players reckon there is a way to go yet before AWE's ownership is settled.
If I am hearing right, then they are right.
CERCG's decision to go hostile represents a rare moment in the conduct of Chinese mergers and acquisitions in Australia. And, amusingly enough, it is a tactic that renders moot any concerns over due diligence or exclusivity.
Asked why it was prepared to move on a bid without satisfying those original core conditions, CERCG said only that it was encouraged to do so by AWE shareholders.
CERCG maintains, again in theatre unconvincing, that this is a friendly takeover. And yet notes of aggression and threat hung heavy in the media briefing that followed Friday morning's announcement.
"What we want to do is a friendly and collaborative approach," CERCG adviser Eddie Rigg said in response to a request to characterise the off-market bid. "They have stalled us and they haven't allowed us to do that. It has been really frustrating," the man from Argonaut Capital said.
"Everyone knows how bad AWE have been as a company over the past 10 years, and particularly the last three years," he continued. "And we don't need to air that dirty laundry."
With friendly approaches like that, who needs hostility.
It is worth noting though that if AWE fulfils our expectations and announces some sort of non-exclusive engagement with a new bidder, then that should disarm, once and for all, critics that imagine AWE's board and executive have placed their own interests above those of shareholders in resisting value transactions.
Having failed earlier this month to develop a constructive conversation with CERCG over its approach for a scheme takeover, AWE chairman, Ken Williams, and chief executive, David Biggs, have worked with speedy diligence over recent days to reassure owners and other potential bidders alike that his board is open for business.
Biggs in particular has cause to be very irritated indeed by CERCG's criticism of past direction of the business given that he did not join AWE until May last year and has done much in a short space of time to rehabilitate the business and its reputation
