Shares in Salamander Energy (LSE: SMDR) are down by 15% today after a consortium led by Spain’s Compania Espanolo de Petroleos (CEPSA) decided it was no longer interested in making an offer for the company. This means that there is now just one offer for Salamander still on the table, with Ophir’s bid still apparently standing.
Indeed, the decision by CEPSA to withdraw its potential bid for the company appears to centre around disclosure of the offer by Salamander. Apparently, CEPSA had not given Salamander consent for the terms of its proposed offer to be announced, with Salamander announcing them last week as consisting of 121p per share as well as one contingent value right, with shareholders receiving up to 24p in cash from this.
Today, though, CEPSA has said that after discussing a potential deal with Salamander, it has no intention to proceed with a firm offer. As a result, shares in Salamander are down heavily and are now trading at the same level as they were one month ago.
Looking Ahead
While it’s clearly disappointing for investors that an offer from CEPSA will not be forthcoming, the offer from Ophir is still on the table and other offers could still be made. Indeed, CEPSA did not actually make an offer, and was merely discussing the possibility of making one with Salamander, so the recent share price gains could have been a case of the market getting a little ahead of itself and pricing in either a firm offer from CEPSA, or else further offers from other potential suitors.
In terms of where the news leaves Salamander, little has changed. Certainly, there now appears to be no chance of a bid from CEPSA but, as mentioned, Ophir’s offer is on the table and, with a deadline of 24 November being set for other offers, there is still time for more bids to be made.
Of course, if Salamander decides to reject the approach from Ophir (and any subsequent bids from other companies), its share price is likely to come under pressure in the short run as the market seems to have built a bid premium in to the company’s share price. Looking further ahead, though, sentiment in Salamander could tick up as the company is forecast to report its first profit in recent years for the full year, with shares in the company currently trading on a price to earnings (P/E) ratio of just 9.7.
Indeed, such an appealing valuation could mean that more bids arrive in the near term and Salamander could achieve its goal of being bought, having being put up for sale in May.