Energy Africa gives reluctant green light to Tullow

Energy Africa, the South African-based oil exploration company which is being taken over by Tullow Oil, yesterday found itself in the unusual position of attacking the offer for undervaluing the business but then being forced to recommend it.

Energy Africa, the South African-based oil exploration company which is being taken over by Tullow Oil, yesterday found itself in the unusual position of attacking the offer for undervaluing the business but then being forced to recommend it.

The offer, launched earlier this month by Tullow, valued Energy Africa at $500m - a 5 per cent discount to its market price. It was also pitched at a 24 per cent discount in rand terms to an unsuccessful bid for the company last year from its largest shareholder, the Malaysian national oil company Petronas.

In a statement yesterday, the board of Energy Africa said: "In terms of maximising value for all the Energy Africa shareholders, your board believes that this is not the best time to sell the company as it is of the opinion that the offer does not adequately reflect the value that your company could realise if it continued to operate in its current form."

However, the statement went on to say that the board had no option but to recommend the bid because Tullow had already received irrevocable undertakings to accept the offer from shareholders speaking for more than 90 per cent of Energy Africa's shares.

The main losers will be Energy Africa's minority South African shareholders who cannot accept Tullow shares instead of cash because of the exchange controls which the government continues to impose. But offshore minority shareholders will be 15 per cent better off in dollar terms than they would have been under the Petronas offer because of the weakening of the US currency against the rand in the last year.

Rhidwaan Gasant, the chief executive of Energy Africa, stressed that there was no "animosity" between his company and Tullow because of the position he and his fellow board members were in. "We have really been spectators in all this," he added.

Mr Gasant, who is expected to stay with Energy Africa following completion of the deal, said: "There is a good strategic and cultural fit with Tullow."