Broker snap: Stingy Centrica bid may still succeed

13th Jul 2009 12:41

Having been given a "put up or shut up" deadline Centrica has decided to "put up" and launched a bid for Aberdeen-based oil and gas firm Venture Production at a level which may be enough to win the day.The energy giant is offering 845p per Venture share, a price which values the target company at £1.3bn. This is too low, argues Venture's management, a view which broker Evolution Securities believes is widely held in the market, not least by major shareholders Larry Kinch and ArcLight, which have rejected the bid.Nevertheless, Evolution believes Centrica still has a decent chance of succeeding, thanks to the 30% stake it already holds in Venture, which means it needs acceptance from shareholders controlling just 20.1% to win the day."We expect other shareholders might just decide to draw a line in the sand, accept the offer and re-cycle their cash," Evolution predicts. "After all, the prospect of owning shares in a listed company where the management team and major shareholder are increasingly hostile towards each other is not that appealing," the broker comments.Merrill Lynch is another that believes Centrica is bidding from a strong position with Venture's ability to block the deal limited "particularly because (1) we see a counter bid as highly unlikely, and (2) the exploration programme lacks transformational wells," the US brokerage suggests. "The fact that 3i, involved in Venture since its creation in 1997, disposed of its stake is a crucial step for Centrica and marks the limited upside that now Venture offers, in our view," Merrill Lynch concludes.