The board of Tap Oil has recommended shareholders reject a $29.8 million takeover from major shareholder Risco Energy Investments, saying the proposal is opportunistic and undervalues the company.
Earlier this month, Tap announced to the market it had received a cash offer from Singapore-based Risco, valuing the Perth-based company at 7 cents per share.
The company’s board released a statement late yesterday rejecting the offer, with an independent expert's report due next month.
“The non-affiliated directors currently believe that the offer price of 7 cents per share undervalues Tap Oil's portfolio of assets, but will update their recommendation once the independent expert’s report is complete,” Tap said in a statement to the ASX.
“The offer appears to be opportunistically timed to take advantage of a rising oil price environment, as well as a potentially significant drilling campaign that may, if successful, increase production and extend the life of the Manora oil field beyond 2023.
“Tap Oil is one of a limited number of ASX-listed junior oil companies with zero debt and existing cash flow generation.”
Tap Oil’s largest shareholder Chatchai Yenbamroong, who has a 25.5 per cent stake in the company, has advised he will not be accepting the offer.
Risco already has a 25.11 per cent stake in the oil and gas company, and Tap said Risco was seeking to gain control by paying a low control premium relative to recent comparable transactions.
The company referenced the 74 per cent premium paid for AWE by Japanese group Mitsui & Co earlier this year, and the 53 per cent premium Roc Oil shareholders received in 2014.
Tap also said that Risco has a unique insight in to the potential value of the company.
“Risco and its founders have actively participated in establishing the strategy of the company, and consequently have a unique insight into the potential value of Tap Oil shares and the potentially high-impact drilling campaign due to commence shortly,” the company said.
Shares in Tap were up 2.7 per cent at 7.5 cents each at 3pm AEDT.