It’s not over until “someone sings”
AWE (ASX:AWE) is the recipient of another unsolicited takeover offer, with Japanese trading giant Mitsui & Co (Mitsui) placing an all cash bid on the table. This new bid follows on from offers made by China Energy Reserve and Chemical Group (CERCG) and Mineral Resources to acquire the company. Both these bids remain open, with the AWE Board recommending, in the absences of a higher bid, the Mineral Resources proposal. The following figure shows the location of the company’s core assets:
Source: AWE (ASX:AWE)
The surprise Mitsui bid is an all cash offer with a price of A95 cents per share, but is the subject of conditions. The A95 cent bid price usurps both the A73 cent per share all cash bid made by CERCG and the scrip and cash bid valued around A86 cents per share made by Mineral Resources.
The Board of AWE, in the absence of a higher bid, had recommended shareholders accept the bid by Mineral Resources. In the light of a higher bid from Mitsui, the Board of AWE has rescinded its recommendation that shareholders accept the Mineral Resource bid, and have reverted to “take no action.”
The Board of AWE (ASX:AWE) will now evaluate the new cash bid made by Mitsui and will report a new recommendation to shareholders.
Turning to the daily chart, overhead resistance is sighted at the January intra-month high of $1.00 (psychological whole number) as marked by the horizontal red line. However, it should be noted that the rapid increase in share price following the takeover offers has resulted in the RSI to ascend into overbought territory (exhaustion of short-term upward momentum). Hence, should the bears emerge over the near-term, a temporary pullback in price could follow. Positively, should this occur, we would view this short-term pause as both corrective and healthy. Medium-term momentum remains in favour of the bulls, as backed by the bullish moving average crossover present since November 2017. This occurs when the 50-day moving average (red line) crosses above the 200-day moving average (green line).
On the Mitsui bid, it is the subject of two key conditions precedent. The first is that the Mineral Resources Scheme Implementation Deed is terminated by close of business on 2 February 2018 and the second that the Directors of AWE recommend the Mitsui bid. We consider these conditions and the other conditions pertaining to the Mitsui bid are not draconian on the Mitsui bid completing.
We recommend Members who hold AWE (ASX:AWE) in their portfolio take no action at this time with regard to all three bids that are on the table.
We will advise Members of an appropriate course of action pending the release of all the appropriate documentation and a fresh recommendation from the AWE Board.
At the time of writing AWE shares were trading at A99 cents per share. The market is indicating its belief that AWE remains in play, especially with two suitors already at the table. We consider the new Mitsui offer does take account of the upgrade in the Waitsia field reserve and resource as at 1 December 2017 and announced post AWE receiving the CERCG and Mineral Resources bids. We also consider the Mitsui bid does better value the broader oil and natural gas outlook.
Members who hold AWE (ASX:AWE) in their portfolio may receive a Bidder’s Statement that has been lodged, by CERCG, with the Australian Stock Exchange. This document outlines its proposal to acquire AWE. Members should take no action on receipt of this document.
With reference to the monthly chart, our previously defined structural resistance region at the $0.95 mark as shown by the horizontal dashed-red line was recently cleared (i.e. current month of January). This is a significant price point as it offered firm support in September 2011, after the deep sell-off which took place after prices reached an all-time high of $4.35 in May 2008. For this reason, we would expect upward momentum to rise, and a medium-term upward trajectory in the share price towards resistance sighted between $1.15 and $1.35 to be on the horizon. This is made up of the 50% and 61.8% Fibonacci retracement levels respectively. A definitive break above this price range would likely steer the broader direction of AWE (ASX:AWE).
With three competing takeover offers on the table, the Board of AWE has recommended shareholders take no action regarding each of the offers at this stage.
The AWE Board will determine an appropriate recommendation regarding all the takeover proposals. We again reiterate that Members should not take any action regarding all the bids at this point. We will assess the takeover proposals when full details, including the AWE Board recommendation, is known, and provide an appropriate recommendation.
Consequently, AWE (ASX:AWE) will remain held in the Fat Prophets portfolio and we will continue to monitor events closely.
