Oil and gas explorer Strike Energy has made a bid to acquire UIL Energy.
Strike’s offer price of 7.3 cents per share represents a 43.4 per cent premium for UIL Energy shares based on the company’s 30-day volume weighted average price (VWAP) of 4.6 cents on October 19.
The premium is 26.1 per cent when the five-day VWAP of 5.5 cents per share is taken into account. Based on the five-day VWAP, this translates to a capitalisation of $16.1 million.
Should the takeover go ahead, Strike and UIL will form a new merged group that consolidates both company’s portfolios.
Strike must raise at least $13 million of capital and achieve a minimum shareholder acceptance of 50.1 per cent among other terms and conditions.
Its primary focus is the large onshore gas resource Southern Cooper Basin in South Australia.
Strike holds interests in five key gas permits in this region (three of them majority owned) and is in the process of evolving two new wells in its Jaws pilot program to production.
Brisbane-based UIL’s prospects are based in North and Central Perth, and represent an attractive expansion for Strike.
In June, Strike also completed the formation of a 50-50 joint venture with Warrego Energy over the West Erregulla (EP469) exploration block in the North Perth Basin.
According to Strike Energy chairman John Poynton, the transaction “plays to Strike’s strengths of being a low cost and high-impact, onshore exploration and appraisal operator, which makes it an extremely attractive opportunity for both UIL Energy and Strike Energy shareholders alike.”
UIL’s board of directors intend to accept Strike’s offer in the absence of a superior proposal and have unanimously recommended shareholders do the same.
Upon completion of the deal, UIL would own about 9 per cent of the shares in the newly merged Strike-UIL group, which will operate in the Perth Basin.
UIL chairman Simon Hickey called it a “compelling offer” with the potential to supply gas on both coasts of Australia.
“Both Strike Energy’s interest in the West Erregulla block and our portfolio enhances the likelihood of a merged entity becoming a substantial operator in the Perth Basin,” he said.
“The West Erregulla prospect, expected to be drilled in early 2019, along with Strike Energy’s current Jaws project, provides UIL Energy shareholders with exposure to highly prospective and significant projects.”