Takeover target Sino Gas & Energy extends gains amid hope for more bids
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Shares in bid target Sino Energy surged in share market trading again Friday morning, as investors took heart that a takeover bid unveiled Thursday from Lone Star may be the first of several.
In a self-described “opportunistic” bid, Lone Star has indicated it will offer 25c a share for Sino Energy (ASX:SEH), which has an interest in valuable gas acreage in China.
The bid has the support of Sino Energy’s board.
But investors are betting rival bidders will come forward as they pushed Sino Energy shares ahead another 3 per cent to 24.25c in active trading again Friday morning, drifting back from the high of 25.5c.
And in a note to its clients, investment bank Citi reckoned it was a no-brainer other bidders will emerge.
“The board has clearly demonstrated they are willing sellers at what we consider a very thin premium,” its analysts wrote in a note to clients. “We anticipate this offer will reveal other interested parties.
“While there is exclusivity (no-shop, no-talk, no due diligence for other interested parties) and a break-fee ($4.5m), we think these will not be considerable deterrents to Chinese firms already familiar with the assets, or able to better navigate the risks to unlocking upside to our valuation.”
As a result, it reckons Sino Energy’s partner in China, China New Energy Mining which two years ago paid $220 million for a 51 per cent stake in the Australian group’s gas reserves, will be a potential bidder.
If not China New Energy Mining, then ENN Energy Holdings, which is already China’s largest gas distributor could well want control of Sino Energy.
“So why haven’t these firms bid before?,” Citi asked in the note. “We think because they allowed Sino Energy to bear the risks of appraisal and progressing to the [overall development plan]” for its China asset.