Well cheap

8 September 2015 By Una Galani Follow @ugalani

The Australian energy group has pitched an all-share takeover to rival Oil Search. Woodside’s strong balance sheet would provide cheaper funds to develop Oil Search’s Papua New Guinea assets. But a 14 pct premium for a target that isn’t in financial distress looks under-powered.

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Australia’s Woodside Petroleum said on Sept. 8 that it had approached Oil Search with a non-binding proposal for an all-share takeover. The proposal values its smaller rival at A$11.6 billion ($8.1 billion), based on Woodside’s closing share price on Sept. 7.

Oil Search, which has oil and gas operations in Papua New Guinea and is listed in Australia, said that its board would review the approach.

Under the proposal, Oil Search shareholders would receive 0.25 Woodside shares for every Oil Search share.

Oil Search is being advised by Morgan Stanley. Woodside is being advised by Bank of America Merrill Lynch.

Shares in Oil Search were trading at A$7.83 per share as of 1416 Sydney time. The offer values Oil Search at A$7.4 based on Woodside’s share price at the same time.

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