China’s Fosun unveils $441 million cash bid for Australian ROC Oil 

The proposed “merger of equals” between Australian exploration and production companies ROC Oil and Horizon Oil has been scotched by China’s Fosun International, which has emerged with a A$474 million ($441 million) takeover offer for ROC.

ROC said Monday it had entered into a bid implementation agreement with Fosun under which the Hong Kong-listed company would acquire all of ROC at A$0.69/share in cash.

The off-market offer, which is subject to Australian government approval, represents a 52% premium to the closing price of ROC shares prior to the April announcement of its proposed A$800 million merger with Horizon, and a 23% premium to ROC’s closing price on June 24, when it revealed it had received its first indicative takeover proposal.

“The proposal to purchase all of ROC’s shares for cash is superior when considered against the alternative merger of equals with Horizon and offers a significant premium to share price performance,” said ROC Chairman Mike Harding.

“This cash offer price is consistent with the valuation ranges provided by the independent experts’ reports produced for the Horizon merger … the board has unanimously concluded that the offer is a superior option.”

In a separate statement, Horizon Managing Director and CEO Brent Emmett said he respected ROC’s decision to be acquired for cash “as a low risk means of achieving immediate value for its assets.”

Emmett added that his company had a “bright future through value realization and cash flow generation from Horizon Oil’s diversified portfolio of production, development and exploration assets.”

In particular, the prospects for Horizon’s Papua New Guinea business, which was the focus of ROC’s merger ambitions, remained strong, Emmett added.

“Following receipt of $78 million from the completion of the partial sale of Horizon Oil’s PNG interests to Osaka Gas, comprising the first milestone payment of the $204 million aggregate consideration, Horizon Oil’s balance sheet is in very sound shape, with cash reserves of approximately $100 million at the end of the June quarter and solid production cash flow,” he said.

“Elsewhere, work to access relatively low risk, substantive additional reserves in and around Maari field offshore New Zealand is in full swing, with two rigs currently drilling. With regard to Horizon Oil’s 27% interest in the Beibu fields, offshore China, we believe the price being paid by Fosun for ROC is consistent with a high valuation for Beibu, given that ROC’s independent expert’s report classifies Roc’s 20% interest in Beibu as the most valuable asset of ROC’s portfolio, by a large margin,” he added.

ROC and Horizon are both equity holders in the Beibu Gulf oil field, which is currently producing around 13,000 b/d.

ROC also has operations in Australia, Malaysia and the UK. In the quarter ended June 30, 2014, the company produced 11,024 b/d of oil equivalent.

One of ROC’s key growth assets is its 50% stake in Petronas Carigali’s D35, D21 and J4 oil fields, offshore Sarawak, Malaysia. The fields, currently producing 10,000 b/d of oil and 17,000 Mcf/d of gas, are to be redeveloped at a cost of $250 million.

Horizon’s major growth asset is its 30%-held Stanley and 27%-held Elevala/Ketu projects in PNG. A $300 million development of the Stanley field has been approved by the PNG government and is expected to be completed in 2016, producing 4,000 b/d of condensate and 140,000 Mcf/day of gas. In the longer term, Horizon’s PNG assets are expected to form the basis of a mid-scale LNG project.

 

Source: platts

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