Armour Energy Ltd. has responded to WestSide Corp. Ltd.’s AU$36.6 million hostile takeover offer, labelling the bid opportunistic and inadequate.
WestSide, controlled by Landbridge Group Co. Ltd., intends to acquire Queensland-based Armour for 12 cents a share, which represented a 94% premium to the one month volume weighted average price of Armour’s shares when the offer was made last Aug. 31.
Armour is on the verge of undertaking two potentially company making transactions which the company expects will unlock the potential of its asset base and position in the Australian gas market.
Armour is currently progressing definitive agreements for a proposed US$100 million farm-in agreement with Oklahoma City-based American Energy Partners LP (AEP). AEP is led by Aubrey McClendon, who also founded Chesapeake Energy Corp. (CHK). The deal would see Armour transfer 75% of its acreage in the Northern Territory to the company.
WestSide’s tilt for Armour is conditional on the farm-in deal not proceeding. The offer will also need to achieve a 50.1% acceptance rate to be successful.
WestSide expects its cash alternative to the proposed American Energy farm-out would allow shareholders to “realize certain value for their Armour Energy Shares, rather than face an uncertain value outcome, should the Northern Territory farm-out proceed.”
Last week, Armour signed a deal to acquire Origin Energy Ltd.’s oil and gas assets on the Roma Shelf in Queensland’s Surat Basin for AU$13 million. The deal sent Armour’s shares soaring more than 80% to 15 cents, significantly higher than the 6.8 cent share price Armour was sitting at when the WestSide offer was lobbed.
After reviewing the offer from WestSide, the board of Armour has recommended shareholders to reject it.
Armour said in a statement that the offer significantly undervalued the company, both in terms of its existing assets, and the potential value the company expects to deliver to its shareholders in the near future.
“The offer does not reflect the current or potential value of Armour’s assets and comes at a time when the company is in the process of decisively rebuilding its business and in the context of increasing demand for gas in Australia,” said Nicholas Mather, Armour executive chairman, in a statement.
The company said its in the process of preparing its target’s statement in response to the offer and would provide additional details to shareholders as to the board’s recommendations.
“In the meantime, the board unanimously recommends that shareholders reject the opportunistic and inadequate Westside offer and take no action in respect of the documents that Westside send to you,” Armour added.
Armour Energy is being advised by Morgans Corporate Ltd. and HopgoodGanim Lawyers in respect of the offer.
Shares in Armour were unchanged at 12 cents in trade on Sept. 10.
Lauren Barrett can be reached at lbarrett@hartenergy.com.
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