Meridian Capital International Fund, a 19.28% shareholder of Africa-focused oil explorer FAR Limited, has rejected the takeover bid for Far launched earlier this week by Samuel Terry Asset Management.
Earlier this week, Samuel Terry Asset Management Pty Ltd as trustee for Samuel Terry Absolute Return Active Fund launched an offer to acquire FAR’s shares at 45c cash per share.
The bidder, which already owns a relevant interest in 4.9% of FAR's Shares, said the offer price represented a premium of 23.3% relative to the closing price of FAR Shares on ASX on the Last Practicable Date (being 28 January 2022) of A$0.365 per share.
Australia-based FAR has interests in offshore blocks in the Gambia, Guinea Bissau and Australia. The company last year sold its stake in the Sangomar development offshore Senegal to Woodside. FAR had been working to sell its Senegal assets for months, as the company had been in default over the payments of its share of costs for the development of the $4.2 billion Sangomar project, after failing to secure a loan to finance its obligations. After the sale it shifted its focus on the Gambia and Equatorial Guinea assets.
Worth noting, while it did sell its whole Sangomar asset stake, FAR stands to benefit from Sangomar further, once the field is on stream.
Namely, after the sale, under the agreement with Woodside, FAR may receive future payments of up to US$55 million from the time of first oil production from the Sangomar Field which is targeted for 2023. These payments are contingent on future oil price being above US$58 per barrel.
Offer 'opportunistic and wholly inadequate'
Meridian Capital International Fund (MCIF), which rejected Samuel Terry's takeover bid for FAR, noted that FAR had said Monday that Samuel Terry offer undervalued FAR's shares having regard to the company’s cash backing and the right of FAR to receive a US$55m contingent payment from the Sangomar deal, as well as its existing oil and gas interests.
"MCIF rejects the Offer at the Offer Price as being opportunistic and wholly inadequate. In particular, in MCIF’s view, the Offer does not offer shareholders any benefit from the [Sangomar] Contingent Payment.
"MCIF remains committed to its investment in FAR and would suggest to the directors of FAR that they convene a meeting of shareholders to consider a distribution of all rights to the [Sangomar] Contingent Payment to shareholders pro-rata to their existing equity shareholdings in FAR (Rights Distribution), ideally with such rights traded directly or indirectly on a listed/tradeable exchange.
"In MCIF’s view, that course of action or any similar arrangement approved by shareholders would help preserve the value of the [Sangomar]
Contingent Payment for existing shareholders on the relevant record date. All other assets including FAR’s cash and oil and gas interests would remain within FAR."
Responding to Meridian's proposal to consider a pro-rata distribution of rights to the contingent payment resulting from the sale of the FAR Senegal asset to Woodside, FAR said it was investigating whether it can do so in an appropriate way and that it would provide an update to shareholders in due course once this investigation is complete.
The Sangomar field, located approximately 100 km south of Dakar, Senegal, is expected to be Senegal's first offshore oil field in production.
The $4.2 billion Final Investment Decision (FID) on the Sangomar field was taken at the start of 2020. The recoverable hydrocarbon reserves of the Sangomar field total approximately 500 million boe. The field is planned to be brought online in 2023 via a Modec-supplied FPSO named FPSO Léopold Sédar Senghor after Senegal’s first president.
The FPSO will be permanently moored at a water depth of approximately 780 meters. It will be capable of processing 100,000 barrels of crude oil per day, 130 million standard cubic feet of gas per day, 145,000 barrels of water injection per day and will have a minimum storage capacity of 1,300,000 barrels of crude oil.