Woodside Petroleum Limited (ASX:WPL) withdrew its proposal to merge with Oil Search Limited (ASX:OSH). The proposal was initiated in September 2015.
On 08 September 2015, Oil Search announced that it had received a non-binding indicative proposal from Woodside. According to the announcement, Woodside proposed to acquire all Oil Search shares for a consideration of one Woodside share for every four Oil Search shares held.
The proposal was subject to various conditions like completion of satisfactory due diligence on Oil Search by Woodside; Oil Search obtaining support from key stakeholders and shareholders; Execution of a mutually acceptable confidentiality agreement and seeking support from the Papua New Guinea Government. Oil Search commented that it will consider the proposal by keeping in view its material equity position in the Papua LNG Project, its low operating cost production assets and other resources.
On the same day, Woodside confirmed its intentions of a confidential and non-binding merger proposal as the company sees the proposal consistent with its strategy of maximising the value of its core assets and growing its portfolio.
On 14 September 2015 Oil Search rejected Woodside’s proposal after receiving overwhelmingly negative feedback from its shareholders. The company mentioned that the proposal was highly opportunistic and grossly undervalued the company.
The company’s Chairman, Mr. Rick Lee commented on the proposal: “The board of Oil Search believes our company is in a very strong position, both operationally and financially. We have a low cost, high quality production base which is generating strong cash flows and excellent growth opportunities, with the proposed PNG LNG Train 3 and Papua LNG among the most competitive new developments in the world. Oil Search provides its shareholders with a pure exposure to PNG and is fully committed to PNG. Our focus is on continuing to build and create shareholder value through the company’s strong future growth prospects.”
Following the announcement by Oil Search, Woodside announced that it was surprised and disappointed that the Board of Oil Search had rejected the proposal without meeting with them to discuss the merits of the agreement or negotiate the terms of a possible merger.
Woodside announced to the ASX today it has withdrawn the proposal to merge with Oil Search, while the latter acknowledged the news and confirmed its initial comments.
Both the stocks entered a trading halt after the market opened until 11:00 AM. As at 11:20 AM OSH plummeted 16% following the announcement, while WPL lost only 3%.
Author: Simon Herrmann
Dec 08, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.