Imperial accepts £1.4bn offer from ONGC
Wednesday 27 August 2008
Imperial Energy accepted a £1.4bn offer from the Indian group ONGC Videsh yesterday, although there are indications that the Chinese could still wade in and spark a takeover battle for the asset.
Imperial, which focuses on oil and gas exploration and production in eastern Europe, recommended a £12.50-per-share bid from ONGC in a statement released to the market at midday. ONGC Videsh is the international arm of Oil & Natural Gas Corporation, India's largest exploration company.
The market is waiting for a reaction from the China Petroleum & Chemical Corporation – known as Sinopec – which has declared an interest but is yet to lay formal terms on the table.
Sinopec released its first-half results yesterday, and after its chairman, Su Shulin, warned of a tougher second half, he said the company had been conducting an internal assessment on a bid for Imperial. "No decision has been made," he added.
Both state-controlled companies are desperate to increase their oil assets abroad as domestic demand continues to soar, driven by huge industrialisation in both countries.
ONGC's bid for Imperial, which is 40p per share lower than it had originally announced last month, comes before the UK-listed group's half-year results, which are released tomorrow.
A spokesman for Imperial said a few factors had contributed to the lower offer, predominantly the 20 per cent drop in the oil price over the past few months.
Andrey Gromadin, an analyst at JP Morgan, said the price still looked reasonable and could be a "positive result" for current shareholders. He continued: "Investors will await more news on potential competition from China. Given the noise generated in the UK and Indian media over Sinopec's interest in Imperial Energy, market participants will likely wait for a bidding war to emerge between ONGC and Sinopec."
Imperial's board announced on 14 July that it had received "an approach which may or may not lead to an offer being made for the company," and the following day added the offer was worth £12.90 per share. Several weeks later it announced that a second, unnamed, suitor had emerged. This was understood to be Sinopec, and there had been some talk at the time that the Korea National Oil Corporation could be interested, although nothing concrete has emerged.
The group searches for oil and gas in Russia and Kazakhstan. It listed in London four years ago, with its shares valued at 25p, giving it a market cap of £2m. Under the stewardship of Peter Levine, it has grown in value by 50 times, and currently produces 10,000 barrels a day. This is expected to increase eight-fold in three years.
In April, a quarter of the group's value disappeared in a day after the group was forced to issue new shares in a plan to raise $600m to fund its development programme.
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