Salamander Energy‘s (LSE: SMDR) shares have jumped today, following the news that Salamander has found itself subject to two possible takeover approaches.
The approaches have been made by peer Ophir Energy and a consortium led by Compañía Española de Petróleos, or Cepsa for short, a Spanish multinational oil and gas company.
According to UK takeover rules, the two parties now have until November 24 to announce a deal to acquire Salamander, or they will be forced to leave empty handed. However, so far Salamander has only received a conditional proposal from Ophir, Salamander’s management has received no details regarding the Cepsa proposal.
Back in play
This is the second time that Salamander has been subject to bid speculation this year. The company put itself up for sale during May, as part of a plan to unlock value for investors. Unfortunately, management could find no buyers for the company, although rumours indicated that Cepsa was weighing up a bid.
Instead, management decided that the best way to unlock value was to divest 40% of the company’s B8/38 concession, which contained the Bualuang oil field and the surrounding G4/50 concession, to Sona Petroleum Berhard.
In total, the company is set to receive $280m in exchange for these assets. Management is planning to return $50m of this capital to investors, which works out at around 11p per share.
The right price
If Ophir is considering a serious offer for Salamander, there’s a chance that the company could make an offer at a considerable premium to Salamander’s current share price.
Indeed, earlier this year it was rumoured that Cepsa was considering an offer for the company of $953m, around £588m. At present levels the company’s market capitalisation is only £252m and an offer of £558m indicates a buyout valued at 227p per share, 136% above current levels.
However, Salamander’s management still believes that the Sona sale is the best option for investors. The deal is on track for completion by year end 2014.
What to do
As of yet, no deal between Salamander and its potential suitors has been agreed and there are still many working parts that need to be sorted out before a deal is signed.
Still, Salamander is an attractive prospect. There’s a chance that both Ophir and Cepsa could make an offer for the company at a generous premium to its current share price, and if a deal does not go ahead then shareholders have a 11p per share special dividend to look forward to after the Sona transaction completes. Additionally, the company currently looks undervalued as it trades at a forward P/E of only 10.2.
