Two of the biggest investors in North Sea gas producer Venture Production yesterday backed management’s rejection of a US$2 billion hostile bid from UK utility Centrica.
US investment firm ArcLight Capital Partners and one of Venture’s founders, Larry Kinch, which between them control 12.8 percent of Venture’s shares, both agreed that Centrica’s £8.45 per share (US$13.5 per share) offer undervalued Venture.
“I believe that Venture’s shares have a value of at least £10 per share,” Kinch, who owns about 7.4 percent of the company, said in a statement.
Centrica, which already owns 29 percent of Venture, is the UK’s biggest gas retailer. The utility is eager to boost its gas production so that it does not have to buy so much gas on the wholesale market where prices are volatile.
In March, Centrica bought a 22 percent stake in Venture for £7.l25 a share and said it was considering making a cash offer for the company.
The utility held meetings with Venture management in recent months but the two sides failed to agree a price, prompting Centrica to make an offer direct to the British oil company’s investors on Friday.
Venture swiftly rejected the offer and chief executive Mike Wagstaff said in an interview on Sunday that many investors were looking for significantly above £9 per share.
Centrica’s offer, which valued Venture at around £1.3 billion (US$2.09 billion), is conditional on it gaining more than 50 percent of the shares in Venture — an additional 21 percent from where it is now.
However, Centrica would need more than 90 percent acceptance to compel remaining investors to sell their shares, thereby allowing it to delist and fully integrate Venture.
Nonetheless, even a stake in Venture, whose North Sea reserves are mainly of gas, would provide Centrica with a hedge for its gas supply obligations.
The UK’s biggest listed utility by market value said its offer would not be increased unless a rival bidder emerged, in which case Centrica reserved the right to up its offer.
This means that, under UK stock market rules, if the bid fails, or a rival bidder does not emerge, Centrica will not be able to improve its bid for at least 12 months.
Centrica’s approach is among a flurry of takeover bids in the past month as firms sought to secure assets before economic recovery sent field prices soaring again.