Deutsche Bank analyst Andrew Lewandowski said the 27 per cent premium was on the light side, with oil and gas transactions premiums typically ranging between 20 per cent and 50 per cent.
“It is not clear that a 28 per cent premium provides sufficient compensation for DrillSearch shareholders,” Mr Lewandowski said, noting the merger would see reduced leverage to the Western Flank oil fairway in the Cooper.
But he said there was limited risk of the deal being voted down given Seven Group’s support and that other shareholders with interests in both Beach and Drillsearch are likely to vote in favour of the deal.
If the merger goes ahead, Beach will remain based in Adelaide and Mr Davis will remain chairman. Mr McKerlie would join the Beach board.
A search for a replacement for Beach managing director Rob Cole, who left for personal reasons in August after three months in the job and is now a non-executive director, is ongoing.
Ord Minnett analyst John Young said acquisition of Cooper Energy, in which Beach holds 20 per cent, could be a logical next step for Beach, boosting its presence in eastern Australian gas supply through the Sole and Manta projects off Victoria.
“This merger is also likely to spur other M&A activity,” Mr Young said.
“We would not be surprised if Senex was to seek additional scale, with Strike Energy a potential target,” he said.
Cheers
BW
DLS Price at posting:
82.5¢ Sentiment: Buy Disclosure: Held
