Medco Reaches Ophir Energy Takeover Deal at 55 Pence a Share

(Bloomberg) -- PT Medco Energi Internasional Tbk clinched a deal to buy Ophir Energy Plc at 55 pence a share after the U.K. oil producer dismissed an earlier approach.

• Ophir’s directors will recommend that shareholders vote in favor of the acquisition, which values the company at about 390.6 million pounds ($511 million), according to a statement on Wednesday.

Key Insights

• The deal represents a premium of 43 percent to the volume-weighted average share price over the three months before news broke of a possible offer. Jakarta-based Medco earlier floated a potential 48.50-pence bid, which Ophir rejected.
• Medco may now become the seventh-largest non-state producer in Southeast Asia, surpassing Hess Corp. and BP Plc in the region, according to consultant Wood MacKenzie Ltd. For Ophir, the deal eases pressure after the company lost a license in Equatorial Guinea over insufficient financing for a liquefied natural gas project.
• When a purchase at 55 pence was proposed earlier this week, analysts were split, with GMP FirstEnergy’s Stephane Foucaud saying it was a “good price,” while broker Stifel said it was 10 pence too low. Bloomberg Intelligence analyst Will Hares said Wednesday the bid is adequate, providing an exit option for shareholders worried about the direction of strategy following the African license loss.

Market Reaction

• Medco jumped as much as 16 percent in Jakarta, the biggest intraday gain in two months. Ophir rose 6.5 percent to 53.9 pence at 10:31 a.m. in London, taking its advance over the past month above 60 percent.

CEO Comments

• Medco is offering “a substantial premium’’ and a “compelling proposition’’ to Ophir shareholders, its Chief Executive Officer Roberto Lorato said by phone. The deal will expand Medco’s reach in Asia, where the companies’ assets complement each other, he said.
• Tanzania and Mexico -- also in Ophir’s portfolio -- offer potential for growth, Lorato said.
• “We have been pretty proactive in terms of seeking growth opportunities, both organically and through acquisitions,” and will continue to do so in a “selective fashion.”

Know More

• Medco will pay for the acquisition with its own cash and debt from Standard Chartered Bank, according to the statement.
• The deal is expected to become effective in the first half of this year.

--With assistance from Joyce Koh.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Amanda Jordan, Rakteem Katakey

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