Why AWE Limited just accepted a $602 million takeover offer

The takeover saga over the last couple of months surrounding oil and gas company AWE Limited (ASX: AWE) appears to have finally finished after the company’s Board of Directors announced this morning that it recommends shareholders accept Mitsui’s cash consideration of $0.95 per share.

Today’s announcement follows the previous bid of cash and scrip with an implied value of $0.83 per share from miner and mining services company Mineral Resources Limited (ASX: MIN). Mineral Resources did not match the offer from Japanese conglomerate Mitsui within the specified time period which was allowed under the terms of its Scheme Implementation Deed.

AWE’s Board also unanimously rejected the takeover bid of $0.73 cash per share from an Australian subsidiary of the state owned China Energy Reserve and Chemical Group (CERCG) which started the intense competition over AWE in late November.

The Mitsui offer values AWE at a market capitalisation of $602 million and represents a 30% premium to the CERCG bid and a 14.5% premium to the implied value of the offer from Mineral Resources. The Mitsui bid is also a 74% premium to AWE’s closing price of $0.545 per share on November 29, 2017, the day prior to the first bid made by CERCG.

The strong interest in taking over AWE occurred after the substantial 78% increase in 2P reserves of the company’s highly prospective Waitsia gas field in Western Australia. The Waitsia field is believed to be the largest conventional gas discovery in Australia in the last 40 years and could supply approximately 10% of Western Australia’s domestic gas needs for at least 10 years.

The Mitsui offer is still subject to a 50.1% minimum acceptance from shareholders and other customary conditions. Foreign Investment Review Board approval for the offer has already been obtained. For AWE shareholders, the Mitsui takeover likely brings to an end an intriguing 12 months with the company’s share price gaining 61% over the period. For longer term shareholders, the news is less satisfying as the AWE share price has not managed to reach the heights of 2008 during the bull market in oil when it traded for over $4 a share.

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Motley Fool Contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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