Oil and gas explorer, Anzon Australia, has chosen ARC Energy as its prospective merger partner, rejecting once again rival Nexus.
Anzon (AZA) and ARC (ARQ) both said yesterday they were in talks about a potential merger that could create a $1.17 billion energy group.
"The proposed merger remains subject to the agreement of final outstanding terms and execution of a merger implementation deed," the pair said in a statement.
"An agreement to proceed with the merger will conclude Anzon's strategic review process announced on 17 September."
Shares in both companies have been placed in trading halts while the talks are completed.
Anzon said it had received a number of proposals and had elected to pursue a deal with Arc on an exclusive basis.
Anzon says it was "negotiating the final terms of a proposed merger" with Arc, which are expected to be concluded tomorrow.
The oil producer initiated an auction last month after a series of approaches from several parties, rumoured to include Santos, Origin Energy and Australian Worldwide Exploration.
Nexus was rejected so it entered the fray, amassing a 16% stake in Anzon after its omission.
Nexus yesterday reported that it had lifted its stake Anzon to almost 19%.
"Nexus Energy Limited ("Nexus") has acquired a further 5.4 million shares in Anzon Australia Limited ("Anzon"). This increases Nexus' strategic stake to 17.84% of the current issued capital of Anzon"
That's an effective blocking stake for any transaction involving a scheme of arrangement merger, or a paper offer.
It gives the spurned Nexus the time to wait to see the terms of the merger, and to agree to reject it in the hope of getting something out of a spot of greenmail.
It could be a similar position to the stalled merger between Symbion Healthcare and rival Healthscope that is being blocked by a second rival in Primary Health Care which owns 20% of Symbion.
Primary has already killed off one merger proposal.
Relations between Anzon and Nexus seem fraught
Merger talks between the two oil and gas companies failed in September.
This led Anzon to invite four companies to conduct due diligence. It did not consider Nexus's proposal to be satisfactory.
The two companies have not signed a stand-still agreement, so Anzon would not let Nexus into its data room. Nexus increased its stake in Anzon to 16.4% (and now to almost 19%) in the belief that this will enable it to block a rival bid.
All three companies are small profitable producers with interests in small to medium oil and or gas fields.
Arc has a clean and open register, Anzon's is dominated by the 53% stake of Anzon Energy and then Nexus near 19% holding. Nexus is 12% owned by Anzon Australia and 13% by a company called Viking Shipping.
Anzon tried to move on Nexus last year, so there's cool relations between the two groups. This could end up one of those stalemates where nobody wins, especially shareholders who see value in the companies.
Would a three-way merger work with that background?
