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Energy Africa spurns $189m Petronas bid
Johannesburg |Reuters | 07-09-2002
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Oil firm Energy Africa yesterday rebuffed a 2 billion rand ($189 million) offer to minority shareholders from Malaysia's Petronas, as the South African group's shares soared to the level of the bid.

The surprise offer, which came late on Thursday, sent Energy Africa's usually illiquid shares jumping 25 per cent, helped by purchases by the predator on the market yesterday.

At 1300 GMT they were trading at 43.75 rand, the value of the cash offer made by the international arm of Petronas.

The Malaysian national oil company said the offer, which was above the South African oil and exploration group's all-time high of 43.05 rand, was final and would not be increased.

It said Energy Africa lacked the scale and diversity to exploit both its exploration and development activities fully and preserve an attractive risk-return profile. "This, coupled with recent unsuccessful drilling results, has increased the uncertainty surrounding the company's prospects," it said.

Although Petronas said it had had talks with Energy Africa's directors and management about liquidity, scale and funding requirements, Energy Africa said the bid came as a shock.

It complained that it should have been approached by Petro-nas first, and the offer was inadequate: "Energy Africa believes that the offer does not fully value the company."

Energy Africa Managing Director Rhidwaan Gasant said talks between the two had been about plans to fund the group's future. "There was no discussion on an offer."

He declined to put a value on his company, saying "the board needs to get together and review the work we've done first".

Gasant blamed the group's low share price on its limited free-float, but pointed to a note from its stockbroker Merrill Lynch, which said the offer fell short of its conservative net asset value estimate of 55 rand a share.

Beth Mandel, of Petronas International's financial adviser Morgan Stanley, said the offer price was "very consistent" with many brokers' price targets. The buy would be funded with internal resources, and "It's fair to presume they've bought in the market today," she said.

Sanlam Investment Management analyst Stephen Roelofse said the offer came as a "big surprise", but he expected most shareholders would accept it.

"It is very unlikely it will outperform the market in the next year, unless we have a big spike in the oil price," Roelofse said of the share, which has outperformed other South African commodity stocks since 1999.

"Exploration companies always have blue sky potential, but you want to unlock value at some stage," Roelofse added.

Petronas International's 80-per cent owned subsidiary Engen owns 56.7 per cent of Energy Africa. In the year to end-March, it had sales of $144 million and operating profit of $34.4 million.

The group has interests in Egypt, Libya, Morocco, Mauritania, Namibia, Tanzania, Uganda, Equatorial Guinea, Gabon, Congo and the United Kingdom.

The Malaysian national oil company became one of South Africa's biggest foreign investors when it bought Engen in 1998. It has since invested about five billion rand in the group.

Energy Africa told shareholders to be cautious in their dealings and said it would advise investors on its views on the offer once a formal bid had been issued.


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