AFR Streettalk

STREET TALK
WestSide situation could end in stalemate
PUBLISHED: 2 HOURS 28 MINUTES AGO | UPDATE: 1 HOUR 42 MINUTES AGO EDITED BY SARAH THOMPSON, ANTHONY MACDONALD AND GRETCHEN FRIEMANN

Coal giant New Hope Corporation has all but ruled out entering the race for $200 million coal seam gas play WestSide Corporation, making it likely a Chinese bid for WestSide will end in a stalemate next week. WestSide is currently under offer from Landbridge Group Co, which put forward a 40¢-a-share takeover in April. The hostile bid was declared unconditional last month and will close on Tuesday. New Hope is the kingmaker. It has a 17.7 per cent stake in WestSide and, so far, has refused to sell to the Chinese. Hedge funds – which now hold between 6 per cent and 7 per cent of the stock – have been sniffing around the situation, hopeful New Hope could mop up the gas junior with loose change from its $1.1 billion cash war chest. It seems the only chance of a higher offer is if New Hope were to enter the bidding. However, it is understood New Hope is not interested in buying WestSide (at this stage) and has even sought to offload some of its stake on-market as recently as this week. Which makes it hard to see where the white knight could come from. Landbridge has amassed only a 23.3 per cent stake, with WestSide’s directors winning the battle with their “take no action” approach. Of course, WestSide shareholders have been through this all before. It was under offer from giant PetroChina early last year, before PetroChina walked “because the general situation in Australia has changed so much”. At stake is a $4.3 billion gas agreement that WestSide and its joint-venture partner Mitsui have with Santos’s GLNG venture. GLNG will buy gas in 2017 at about $9.28 a gigajoule, assuming benchmark crude oil prices around current levels of $US110 a barrel, from a joint venture half-owned by WestSide. Broker Taylor Collison reckons the Landbridge bid values WestSide at less than 50¢ a gigajoule, which could explain why WestSide has rejected the bid and shareholders are holding on to their stock. It is well below the mark struck with GLNG, and about half what Santos paid for Eastern Star Gas in 2011, on Taylor Collison’s numbers.