Shares in small energy group, AWE fell more than 16% at one stage yesterday after China’s state-owned China Energy Reserve and Chemical Group dropped its $430 million “offer" AWE just days after news of the non-binding offer was made public.
AWE shares, which rose 23% last Thursday when it revealed that CERCG had approached it with a “friendly” proposal, saw a slide back to a day’s low of 58.5 cents, the ended the day down 10% at 63 cents, meaning some of last Thursday’s increase remains in the market price.
CERCG’s asked for due diligence to firm up its offer, a request that didn’t sit well with AWE which made clear the 71 cents ‘offer’ was on the skinny side.
Or in the words of AWE’s statement last Thursday that the offer was “not sufficiently attractive” to warrant opening up its books. That’s despite the offer representing a 30% premium to AWE’s previous closing price.
AWE said on Tuesday it has received notice from CERCG "that it had formally withdrawn its conditional, non-binding indicative proposal" to buy the company.
“The AWE board remains fully committed to acting in the best interests of, and maximising value for, AWE’s shareholders," it added.
Perhaps it was the lack of any warmth in the initial AWE reaction that saw the Chinese company depart.
Advisers for the two are believed to have since held discussions on a potential way forward to open up negotiations – but the Chinese company walked.
Brokers say that one of the reasons why the share price didn’t fall back to the levels before Thursday’s offer is that hedge funds now regard AWE as being in play with a new bid possible from another source.
The Chinese offer has established a price base for any new offer – it has to be well above 71 cents a share.
