Seplat Petroleum Development Company Plc, a Nigerian oil exploration firm, has confirmed that it made a preliminary approach to Afren Plc over a possible merger.
A statement by the Nigeria Stock Exchange noted that the oil firm notified it on Thursday, “in accordance with the
provisions of Section 10 of the Amended Listing Rules of The Nigerian Stock Exchange.”
“Seplat confirms that it has made a highly preliminary approach regarding a possible combination with Afren. Seplat
however notes that there can be no certainty that an offer will be made or as to the terms of any offer,” the NSE said.
A saviour is greatly needed
The London Stock Exchange (LSE)-listed Afren, with focus on Nigeria, had last month announced Seplat’s approach. The announcement encouraged some rise in its falling shares until Wednesday, after leading corporate and institutional stockbroking and advisory firm, Oriel Securities downgraded to “sell,” citing imminent expiry of Afren’s tax holiday and falling global oil prices. Afren lost 5.7 percent to end the day at 39.4p.
“We are not convinced there is much equity value in Afren at $60 oil and still see it as limited at $80,” the Financial Times quoted Oriel as saying.
The advisory firm further asserted that once Afren’s tax break from the government of Nigeria ends in 2016, it may find it impossible to offset down debt.
Even if Afren decides to sell its assets, the continued slump in global oil prices will make them less valuable
Oriel notes therefore that Afren is in a dire position when placed in comparison with several energy firms whose shares have fallen as a result of plummeting oil prices. Its shares could therefore lose further value.
However, Seplat’s strong financial position, following dual initial public offerings in the NSE and LSE last April may be Afren’s saving grace. Seplat’s interest in the company had once supported its shares, it could do it again.
Deal deadline set
Renaissance Capital, a leading international investment banking and research firm, had last October said that Seplat was strongly positioned to capture upcoming non-organic growth opportunities. If Seplat would take Afren as one of such opportunities, it has until January 19 to make a decision, in accordance with Rule 2.6(a) of the UK City Code on Takeovers and Mergers.
“… it must either announce a firm intention to make an offer under Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the
Code applies,” the statement by the NSE notes.
Seplat says the deadline can be extended with the consent of the UK Takeover Panel (the “Panel”) in accordance with Rule 2.6(c) of the Code.
