HORIZON Oil said it remained committed to creating wealth for shareholders following the collapse of a proposed $800 million merger with Roc Oil.
Horizon was forced to terminate the all-scrip merger with Roc after the latter was handed a superior US$450 million takeover offer from private Chinese firm Fosun International.
The Roc board unanimously recommended its shareholders accept the Fosun offer, of 69 cents for all of Roc’s issued shares.
The board’s recommendation of the Fosun offer resulted in the non-satisfaction of one of the conditions precedent to the Horizon-Roc merger, first announced in late April.
As a result, Horizon terminated its merger implementation deed while a scheme meeting of Horizon shareholders was also cancelled.
The merger of equals would have seen Horizon shareholders receive 0.724 Roc shares for each Horizon share, leaving Roc shareholders with about 42 per cent of the merged company.
The deal would have created an A$800 million oil and gas company with assets in Malaysia, Papua New Guinea, China and New Zealand.
While Roc chairman Mike Harding had touted it a “cracking deal”, and one which was a year in the making, it faced opposition from Roc’s largest shareholder Allan Gray.
In reaching the decision to endorse Fosun’s offer, Mr Harding said the board had weighed up alternatives, including the standalone value of Roc and the value of pursuing a merger with Horizon.
“The proposal to purchase all of Roc’s shares for cash is superior when considered against the alternative merger of equals with Horizon and offers a significant premium to share price performance,” he said.
“This cash offer price is consistent with the valuation ranges provided by the Independent Experts’ reports produced for the Horizon merger.”
Horizon managing director Brent Emmett said he respected Roc’s decision to accept Fosun’s offer.
“While the board of Horizon Oil saw significant value potential in creating what we considered would be a leading Asian mid-cap exploration and production company, we note and respect Roc’s decision to be acquired for cash, as a low-risk means of achieving immediate value for its assets, bringing an end to Roc’s 15 year history as an ASX listed oil and gas company,” he said.
“While an at-market merger with Roc at a ratio which had been relatively consistent for 12 months was appropriate for Horizon Oil, we consider that a cash offer by Horizon Oil for Roc is not.
“Fosun’s bid of approximately US$450 million for Roc endorses the valuations of both independent experts, Deloitte Corporate Finance Pty Limited and Grant Samuel & Associates, who determined the relative value contribution of Horizon Oil to the merged entity to be approximately 1.5 times that of Roc.”
Prospects remain bright for Horizon
Despite Horizon’s unsuccessful merger attempts, the company highlighted it retained strong prospects from its diversified asset base and it remained committed to building wealth for shareholders.
It said it would consider opportunities to further expand its operations as they arise.
“While the merger with Roc was one opportunity to achieve this expansion, it was not a deal that had to be completed for Horizon Oil to achieve a positive market re-rating and secure its ongoing success as a highly regarded regional exploration and production company,” the company said.
Mr Emmett said Horizon would continue to focus on value realisation and cash flow generation from its diversified asset base, with its PNG business expected to be a significant focus for the company in the future.
“Prospects for our PNG business, which was the focus of Roc’s merger ambitions, remain very strong with encouraging recent progress, and we intend to continue to focus on creating value from our PNG assets,” he said.
“At Maari field, offshore New Zealand, work to access relatively low risk, substantive additional reserves in and around the producing fields is proceeding on schedule, with two rigs currently drilling.”
The company’s big ticket to success in PNG remains its stake in the Stanley development it shares with Talisman Energy which would give it opportunities to feed the gas into other prospective developments in the country, including Elk-Antelope.
Horizon’s balance sheet remains in good shape, with cash reserves of about US$100 million at the end of the June.