nexus eyes merger with anzon

Nexus eyes merger with Anzon
Barry FitzGerald
September 25, 2007

NEXUS Energy is seeking to create a $1.5 billion mid-tier oil and gas group by proposing a merger with Sydney-based Bass Strait oil producer Anzon.

Nexus has given its merger push some muscle by first securing a 10.9 per cent stake in Anzon through on-market share purchases and in a share swap with Norway's Viking, a shareholder in both Nexus and Anzon.

The aggressive move by Nexus seeks to pre-empt what might come from the formal process Anzon has under way to allow potential bidders for the company access to a "data room".

Companies rumoured to have made it on to Anzon's shortlist of potential bidders include Santos, Origin, AWE and ARC Energy. But while they might have access to the data room, they do so knowing that Nexus has now acquired a potential "blocking" stake to their full-ownership ambitions.

But Nexus is not in the box seat either. Anzon is 53 per cent owned by Anzon Energy, a company listed on the alternative Investment Market in London. It will be the king-maker in any shoot-out for Anzon.

In revealing its strategic 10.9 per cent Anzon stake yesterday, Nexus did not mention any merger intentions. But that is believed to be the case, with the pressure now on Anzon to first allow Nexus to undertake due diligence before it commits to a binding offer.

Nexus's merger ambitions reverse the situation last year when Anzon made a hostile takeover bid for the Melbourne group. That bid failed and has left Anzon with a residual holding in Nexus of 12.5 per cent, second to Viking with 15 per cent plus the Nexus shares it gets in its swap for Viking's Anzon shares.

Anzon is the manager and 40 per cent partner in the BMG oil project in Bass Strait, originally developed 50:50 with Beach Petroleum. They each recently sold 10 per cent stakes to Japan's Itochu Corp. That deal implied a 100 per cent value for the BMG project of $1.23 billion.

The BMG stake comes with exposure to an as-yet untapped gas resource that has growing appeal because of the sharp rise in gas prices on the eastern seaboard.

Nexus is developing the Longtom gas project in Bass Strait. Nexus also has a big exposure to the expected development boom in liquefied natural gas projects in the Browse Basin.