Mineral Resources Lobs Rival Bid for Australian AWE

Australian mining services and processing company, Mineral Resources (MRL), has launched a rival takeover bid to China Energy Reserve and Chemical Group (CERCG) for oil and gas producer AWE, AWE said December 11.

AWE, which is focused on developing the second stage of the Waitsia gas project in Western Australia and has stakes in the Casino and BassGas projects on the country’s east coast, said it received the proposal from MRL after close of trading on December 8. Earlier that same day CERCG made its second takeover bid for the company.

MRL’s proposal is for a scrip acquisition at A$0.80/share, which compares to CERCG’s all cash takeover offer of A$0.73/share. In the week prior, CERCG had made a bid of A$0.71/share, which it subsequently withdrew.

“The AWE Board will evaluate the MRL proposal and the proposed takeover offer from CERCG, and provide shareholders with a recommendation in due course,” AWE said.

RBC Capital Markets analyst Ben Wilson said the interest in AWE shows the appeal of the Waitsia gas resource. “We think these bids for AWE come at an opportunistic time with AWE trading at a discount to our risked discounted cash flow valuation of A$0.91/share (A$1.13/share unrisked) due in part to the market’s reluctance to attribute value for the Waitsia resource despite strong flow test results and a significantly upgraded resource size,” he said.

“AWE is currently trading at a [roughly]10% premium to the implied MLR bid which suggests to us that the market is positioning for either a higher bid from CERCG, an upwardly revised bid from MLR or a possible third bidder,” he said.

MLR said it does not intend to sell any gas from AWE’s Waitsia gas project offshore as it is committed to supplying the domestic market as well as its own large gas needs.

Meanwhile, CERCG is studying the viability of transporting LNG from Western Australia to the country’s tight east coast market, by road, rail and ship, the company said in a statement.

“It should be possible for us to ship 100 or 200 of our 40-foot ISO containers, each containing 18 [metric tons] of LNG, from Australia’s West Coast to customers on the east coast,” CERCG Australia’s business manager Keven Gao said.

AWE has appointed UBS AG, Australia Branch, and Highbury Partnership as financial advisors and Allens as legal advisor.