Is Mitsui about to sing – we think so
The period to accept the Mitsui & Co takeover offer for AWE (ASX:AWE) will close on 6 April 2018. In response to a slow acceptance rate of its offer, Mitsui & Co has announced its intention not to extend the acceptance period beyond the current close date, subject only to its ownership level in AWE at the close. Mitsui & Co has also indicated an intention not to change the current consideration it is offering to acquire AWE. The following figure shows the location of the company’s assets:
Source: AWE (ASX:AWE)
Mitsui & Co is offering A95 cents per share to acquire all of AWE’s share capital.
The offer remains subject to various conditions that we have reviewed, and consider not to be detrimental to the Mitsui & Co takeover offer completing.
In a recent amendment to its offer for AWE, Mitsui & Co indicated its intention not to extend the acceptance period beyond the current close date of 6 April 2018. This condition is however subject to Mitsui & Co receiving acceptances for a minimum 50.1% interest in the share capital of AWE. At that ownership level, Mitsui & Co may then extend the takeover offer period. The conditions attached to the takeover offer and that have not already been satisfied remain in place. Mitsui & Co will on reaching a 50.1% interest in the share capital of AWE null all conditions, making the takeover offer unconditional.
Mitsui & Co further indicated that the A95 cents per share consideration would not be varied.
At the time the amendment to the original offer was issued by Mitsui & Co, it held 16.53% of the share capital of AWE.
The Board of AWE have unanimously, in the absence of any higher bid, recommended the Mitsui & Co offer and provided an independent valuation of the offer. We agree with the independent valuation for AWE to be in the range of $0.78 to A$1.06 per share.
We believe the A95 cents per share consideration does reflect a fair and reasonable value for the now slimmed down AWE.
Our view is premised on the value of the Waitsia field, the company’s other assets and a top side target for Brent Oil in the range of US$74 to US$84 a barrel by calendar year-end. At the time of writing Brent Oil was trading around US$70.33 a barrel.
We recommend participating Members accept the Mitsui & Co offer of A95 cents per share. Members should action our recommendation at a time to lodge a valid acceptance closer to the close date of 6 April 2018.
Fat Prophets will continue to cover AWE (ASX:AWE) until the Mitsui & Co takeover offer is free of all conditions and the consideration must be paid to AWE shareholders. At the time the Mitsui & Co offer becomes unconditional, Fat Prophets will advise its cessation of coverage of AWE (ASX:AWE).
