South-Perth based Cooper Energy Ltd chairman Laurie Shervington today said KPMG's valuation of hostile takeover target Incremental Petroleum Ltd was out with the fairies.
Incremental yesterday released the findings which valued Incremental Petroleum at as much as $4.18 a share, almost five times its current price.
Mr Shervington said the directors of Incremental have failed to offer their shareholders any alternative to the "compelling takeover" offer from Cooper Energy.
"If you believe in this valuation, you'll believe there are fairies at the bottom of the garden," he said.
Cooper is offering Incremental shareholders a choice of 50 cents cash plus 1.9 Cooper shares or 3.1 Cooper shares for each of their Incremental shares. Incremental's shares last traded at 87 cents.
Mr Shervington said Incremental shareholders should question its directors' reliance on the target's statement valuation.
"As an Incremental shareholder, Cooper Energy is very keen to see improved value for shareholders," he said.
"Cooper's plan for delivering a strong value kick to our fellow shareholders in Incremental is to merge the companies, combine production, diversify portfolio risk and apply our strong cash reserves to the rapid development of the assets of the merged group.
"We think this makes sense for Incremental shareholders yet the company's board is clinging to the notion it can do this under its own steam."
Last week, executive director and co-founder of Cooper Energy, Greg Hancock, admitted the takeover bid could become ugly if Incremental's board acted against its shareholders' wishes and refused the unsolicited $104 million all-scrip offer.
Brokerage Hartleys has made an independent assessment of the speculative buy, saying that the offer made sense for both companies.
Hartleys said that both companies were "highly undervalued" and the proposed deal could provide increased earnings, reserves and production potential.
Earlier this week, Cooper advised the stock market that there were 6.68 per cent of Incremental shares placed in the Institutional Acceptance Facility. Cooper already holds a 4.99 per cent interest in Incremental.
