South East Asian and African focused oil play Ophir Energy (OPHR) falls 2% to 44.1p as it rejects a £360m takeover approach from Indonesia’s Medco.
The argument that a 48.5p per share bid undervalues the company is strengthened by the previous revelation that Medco made an approach at 58p in October and 53.8p in December.
This would suggest Medco is reacting opportunistically to the fall in the oil price since October. However, will Ophir be able to convince its shareholders to hold firm?
Norway and UK-focused peer Faroe Petroleum (FPM:AIM) tried in vain to get investors to resist interest from DNO but a run of bad news undermined its efforts and it was forced to capitulate on 9 January as shareholders snapped up the 160p (a slight improvement on the initial bid of 152p) on offer.
As broker Cantor Fitzgerald observes: ‘While we agree with Faroe’s board that the offer remains low - our updated valuation implies over 20% upside - weak recent newsflow and market conditions have, perhaps unsurprisingly, swayed shareholders.’
Commenting on Ophir’s decision to reject Medco’s offer BMO Capital Markets analyst David Round says: ‘We viewed the possible deal with Medco as a reasonable offer.
‘With the oil price creeping up and possible question marks around value for Tanzania, we are not surprised it has been rejected although we question the extent to which Medco can justify an increased bid in order to support strategic ambitions.'
