The battle for control of shale junior Armour Energy has heated up after a $36.6 million takeover offer by China-owned WestSide Corporation was deemed inadequate.
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The judgment by the expert hired by Armour to assess the offer lends weight to the shale explorer's advice that shareholders rebuff the hostile bid
Armour's shares are worth 22¢ to 37¢, according to BDO Corporate Finance. The mid-point of the valuation range is more than double WestSide's cash offer of 12¢ a share, which itself was almost double the 6.8¢ at which Armour's shares were trading before the bid.
Armour directors unanimously told shareholders to reject the "inadequate, unsolicited and opportunistic" offer and said WestSide, which is part of privately owned Landbridge Group, "wants to extract value at your expense".
Shares in Armour, which is being advised by Morgans, rose 4.2 per cent to 12.5¢.
Shareholders, including Armour directors controlling 29.51 per cent of the stock, don't intend to accept the offer as of Wednesday, the Brisbane-based company said.
Armour is asking shareholders to instead support a proposed $US130 million ($182 million) exploration venture with American Energy Partners, the company of US shale pioneer Aubrey McClendon, that would have AEP buy 75 per cent of the Australian player's vast acreage in the McArthur Basin in the Northern Territory and western Queensland.
The investment would be Mr McClendon's first outside North America in what some regard as a vote of confidence in the potential of Armour's exploration acreage, despite the dive in oil prices that has caused other foreign investors to abandon shale exploration in Australia.
Nicholas Mather, executive chairman of Armour who leads DGR Global, its biggest shareholder, said the offer from the Chinese group "is inadequate and does not reflect fair value for Armour shares". He said it offers no value for the proposed value of Origin Energy's idled oil and gas production assets on the Roma Shelf in Queensland.
Mr Mather said the AEP farm-out deal "values Armour substantially higher, on a non-control basis", noting that a proposed equity placement to AEP at 20¢ a share suggests a $60.9 million valuation.
WestSide, which is being advised by JB North & Co, has yet to respond.
