Ophir Energy has slumped nearly 6% after it proposed a £267m offer for Salamander Energy to boost its presence in south east Asia.
Both Ophir and Spain’s CESPA had made approaches to Salamander but on Monday the Spaniards walked away, leaving the field open to Ophir.
Ophir is making an all share offer for Salamander which - at last night’s closing price - is worth around 103p a share. That disappointed investors given that CESPA had been considering an offer worth 121p a share, but even so, Salamander has edged up 0.75p to 91.50p.
But Ophir has fallen 10.2p at 169.9p, not helped by the company reporting two disappointing drill results in Tanzania. Liberum analysts said:
The offer has received conditional acceptance from Salamander. Ophir and Salamander describe the combination as compelling. It will enable Ophir to reinvest Salamander’s cash flow in a region where it has few assets. It has failed recently to invest successfully in its own core area. We may struggle to see the attraction of the combination.
Oriel Securities was not exactly positive, either:
Albeit it is all share offer (instead of cash), we believe this potential transaction would take away from our current investment thesis on Ophir. Whether it was all cash or share offer, we believe it is a loose/lose proposition for Ophir. In a share deal, we believe the current shareholders will not be too happy with diluting themselves at these levels. Furthermore, we believe Ophir management will have to make a very good case for this transaction, and given the first six month results of Salamander, we think it would be a difficult case to make. It would be interesting to see if Ophir’s shareholders approve this, especially that the offer is still not been made.
RFC Ambrian said:
We believe that the rationale for the acquisition of Salamander makes good sense. There should be substantial synergies from operating cost savings and the ability to allocate capital more efficiently across a larger portfolio of development, appraisal and exploration projects/prospects.
However it seems to us that Salamander shareholders will receive the bulk of these benefits under the proposed exchange offer.
