Chinese Energy Reserve and Chemical Group (CERCG) has withdrawn its $430 million takeover offer for AWE, sending shares in the oil and gas junior down more than 16 per cent.
Last month, the Chinese state-owned company made an unsolicited, non-binding takeover proposal for AWE at 71?? a share, a 30 per cent premium on its 54?? trading price at the time.
While AWE did not reject the offer, its board said at the time “its initial reaction is that the indicative proposal is not sufficiently attractive to provide access to due diligence”.
Now CERCG has withdrawn its offer before AWE’s board was able to finish its assessment of the proposal.
RBC Capital Markets analyst Ben Wilson said CERCG’s withdrawal of its takeover bid was not wholly unexpected given AWE’s initial response.
“We are not overly surprised to see the indicative bid withdrawn as M&A is difficult to pick how it plays out,” Mr Wilson said.
“The manner in which the indicative bid was rebuffed, specifically making the bid letter public in the context of keeping possible SPP [share purchase plan] investors fully informed, possibly impacted the bidder’s appetite to push ahead.”
Despite this, Mr Wilson said there was potential for a raised offer and the withdrawal of CERCG’s bid did not preclude another offer, however, “we think there likely needs to be some clear air before this occurs”.
Fat Prophets analyst David Lennox said it was clear from the AWE board’s initial reaction to the takeover proposal that the Chinese offer would probably be withdrawn, and AWE’s share price act accordingly.
“We saw this happen 12 months ago with Lone Star Japan Acquisitions’ offer [for AWE] at 81?? a share,” Mr Lennox said.
“Overall, the company needs to demonstrate it can get its share price back to 71??. They are unlikely to do it for 81??.”
He said this was dependent on AWE’s focus on bringing core assets such as its Waitsia gas project in Western Australia online, and securing gas sales for its projects.
“There’s doubt we’ll see [a share price of] 81?? for a while, but with higher energy prices they could get to 71??,” Mr Lennox said.
After falling as low as 58.5??, AWE’s share price had made a slight recovery by the end of the day to be 11.4 per cent lower at 62??.
This story Administrator ready to work first appeared on Nanjing Night Net.