Which junior oil and gas company has just fielded a takeover bid?

Horizon Oil Ltd (ASX: HZN) has launched a takeover bid for its smaller counterpart, Cue Energy Resources Ltd (ASX: CUE), at a slender 10% premium to its last trading price.

The larger oil and gas company also said in a statement to the ASX on Monday that it had acquired a stake of 19.9% in Cue.

Offer in cash and scrip

Horizon Oil is offering 0.8 cents in cash and 0.5625 Horizon shares for each Cue share under the deal, which Horizon said came to an implied value of 14.3 cents for each Cue share.

Cue shares closed at 13 cents on Friday.

Horizon said in its statement to the ASX:

The offer consideration therefore represents a 10% premium to the closing price of Cue shares of $0.13 on the last practicable date, and a premium of approximately 16.3% to the 30-day VWAP (volume weighted average price) of Cue shares of $0.123 on ASX up to and including the last practicable date. If Horizon is successful in acquiring all of the Cue Shares on issue that Horizon does not have a relevant interest in, existing Cue Shareholders will (in aggregate) hold 16.31% of the combined group and existing Horizon Shareholders will (in aggregate) own 83.69% of the combined group.

Cue has so far made no statement regarding the offer.

Horizon said in its bidder's statement that it had acquired its 19.9% stake in Cue from Echelon Resources Ltd (ASX: ECH) at 11.5 cents per share.

Synergies make sense

Chairman Bruce Clement said the Horizon Oil takeover bid made sense for Cue shareholders.

The Horizon board believes that, if Horizon acquires 100% of the Cue shares on issue, potential synergies will be available to the combined group, including from the consolidation of overlapping joint venture interests and more efficient joint venture management. The combination of Horizon and Cue, if Horizon acquires 100% of Cue shares, may unlock up to $2 million of annualised synergies. Horizon expects that the majority of these cost synergies, if realised, would be progressively achieved over approximately 12-18 months following successful offer completion.

Mr Clement said the companies had a long-standing relationship, having been joint venture partners in the Maari field for more than 20 years, "and more recently through Horison's 2024 acquisition of a 25% interest in the Mereenie field in Australia, in which Cue holds a 7.5% interest''.

He added:

With common interests in assets and non-operators in those permits, common geographical focus and similar strategies, Horizon considers the proposal to be logical. If accepted by all eligible Cue shareholders, the offer would result in an effective merger of the two entities creating an ASX-listed oil and gas producer with nine producing assets across five countries in Southeast Asia and Australia.

Horizon was valued at $390.6 million at the close of trade on Friday, while Cue was valued at $90.9 million.