Venture investors agree Centrica offer 'too low'

13th Jul 2009 12:05

Shareholders owning almost 13% of Venture Production have backed the oil and gas firm's decision to reject an 845p-a-share hostile cash bid from Centrica.One of Venture's founders and owner of a 7.4% stake, Larry Kinch, thinks the shares are worth at least £10 each, while institutional shareholders are said to want at least 900p."Given my understanding of Venture, of its management and of its prospects, I believe that Venture's shares have a value of at least £10 per share," Kinch said in a statement."Other shareholders should take a longer-term view of their investment in Venture Production or at least demand a price that compensates properly for the long-term value they will give up by accepting a cash offer for the company now."ArcLight Capital Partners, an energy-focused investment firm with a 5.4% holding in Venture, called the move "opportunistic"."The offer is an opportunistic attempt by Centrica to exploit the short-term weakness in the financial and commodity markets as well as the financial and management pressures on certain of Venture's other significant shareholders," it said.Those views reflected the unanimous decision by the Venture board to turn down Centrica's £1.3bn bid. Bosses say the offer "substantially undervalues Venture given its near and long term prospects and the strategic position and high quality of its UK gas reserves and resources."The unsolicited approach, made after the stock market closed on Friday, came as British Gas-owner, Centrica, bought private equity group 3i's entire 5.4% stake in Venture. It now owns 29% of the business.Centrica has also entered into a conditional agreement to acquire all of the convertible bonds held or controlled by 3i.It's said the offer price will not be increased unless a competitive situation arises.Sam Laidlaw, chief executive at Centrica, called it "an attractive offer". The bid is at an 88% premium to the price in January when speculation about an offer first surfaced."This transaction will provide the enlarged group with an enhanced position in the North Sea and a diversified asset portfolio across a number of asset and production areas. Centrica's backing will provide the financial strength required to develop Venture's business fully," Laidlaw said.Stockbroker Killik Capital is pleased Centrica has not been "bullied" into overpaying for an acquisition it believes is not essential for the group."Centrica is trading on a prospective 5.7% yield - a level which we feel provides an excellent long-term opportunity to buy a well-managed company with a strong brand, high market share and scope to add shareholder value through the implementation of its vertical integration strategy," says head of equities Jonathan Jackson. "We continue to be buyers."In a separate statement, Venture confirmed gas in the eastern section of the Marram field in the East Irish Sea and is still drilling the Andrea exploration well 48/15b-10 in the Southern North Sea.Venture says Andrea has the potential to be its largest discovery to date with pre-drill recoverable resource expectations of between 3 and 44 million barrels of oil equivalent (MMboe)."On a risked basis the Andrea well was one of the top opportunities in our 2009/10 drilling programme and the information so far is extremely encouraging," said chief executive Mike Wagstaff.