Chinese group launches $463m AWE takeover bid

A Chinese state-owned energy company has stepped up its efforts to gain control of the Waitsia gas field north of Perth, launching a hostile bid today for oil and gas group AWE after withdrawing its proposal for a friendly takeover earlier this week.

China Energy Reserve and Chemical Group, through its 80 per cent-owned Australian subsidiary CERCG Australia, has priced its bid for AWE at 73 cents per share, valuing the target at $463 million.

CERCG walked away from its earlier proposal, priced at 71 cents per share, on Tuesday after the AWE board did not allow the Chinese company to undertake a final due diligence review.

However, CERCG said it had conducted more analysis of the Waitsia gas project, located in the Perth Basin and 50 per cent owned by AWE, and estimated it had reserves of at least 500 petajoules.

In a statement to the ASX, AWE advised its shareholders to take no action in relation to the offer until they receive a recommendation from the board.

"The AWE board will evaluate the offer and provide shareholders with a recommendation in due course," the company said.

AWE has appointed UBS and Highbury Partnership as financial advisers and Allens as legal advisers.

Argonaut deputy chairman Eddie Rigg, who is finanical adviser for CERCG, said the company had been encouraged by shareholders to make a second proposal and had received ‘unsolicited interest’ following the initial offer.

Mr Rigg said the information CERCG wanted from the due diligence review should be publicly available information.

The information relates to supply contracts, production licences and development of stage two of the Waitsia project among other things.

CERCG managing director Liping Xuan said the company was comfortable with the new offer.

“We are pleased to make this offer directly to AWE shareholders, which provides them with the opportunity to lock in certain all-cash value at an attractive price while removing the significant operational and market risks associated with AWE,” he said

“We are also pleased that AWE shareholders, who are the ultimate decision makers, will have an opportunity to realise compelling value for their shares.”

The Chinese company also flagged plans to use the Waitsia project to potentially supply gas to the east coast via special LNG containers used in its Chinese operations.

MinterEllison is acting as legal adviser for CERCG.

AWE also announced on Friday that the front-end engineering and design process for the construction of stage two of Waitsia was nearing completion after the company received five tender subsmissions.  

Three of the tenders use a traditional engineering, procurement and construction (EPC) approach while two are build, own and operate proposals.

The company is also currently in the process of completing a $10 million share purchase plan at 50 cents per share, after recently finalising a $38 million placement at the same price.

AWE shares finished the day at 73 cents, up 10.6 per cent.