Centrica victorious in hostile bid for Venture Production

Published on Monday 24 August 2009 21:35

CENTRICA yesterday sealed victory in its £1.3 billion hostile battle for North Sea gas producer Venture Production after seizing control of the majority of the Aberdeen-based group's shares.

After the takeover received competition clearance from the European Commission on Friday afternoon, the British and Scottish Gas owner was able to buy up shares it needed in the market. Before 10am yesterday, Centrica declared that it owned or controlled more than 50 per cent of the Aberdeen company, effectively ending the battle. By last night that had risen to 58.7 per cent .

Centrica launched the hostile takeover for Venture's major gas reserves to reduce the amount it needs to buy from the volatile wholesale markets to supply millions of retail customers.

Venture rejected the offer, saying it undervalued the group's existing assets and prospects as well as its strategic value.

The 50 per cent threshold gives Centrica management control of Venture, freeing it to dictate its day-to-day running, although it wants outright ownership of the group.

Venture's remaining institutional investors are expected to accept the 845p a share offer, with little prospect of it paying a dividend as a majority owned subsidiary of Centrica.

Centrica's success is a vindication of chief executive Sam Laidlaw, who made little attempt to strike an agreement with the board of Venture. Holding only two perfunctory meetings with his Venture counterpart, Mike Wagstaff, Laidlaw only informed Venture of its bid after it was launched.

The structure of Centrica's final offer led to accusations that it was bullying Venture's shareholders with a "take it or leave it" approach. It is not the first time Laidlaw has played tough in the company's drive to hedge Centrica's energy needs.

Earlier this year he bought a quarter stake in British Energy at a lower price per share than that paid for the rest of the nuclear group by EDF, in a deal which included selling the French energy giant a Belgian business it had deemed non-core.

Venture, which rejected a 950p offer from Centrica back in 2007, mounted a spirited defence. Wagstaff argued that the offer gave no value to Venture's expertise in bringing oil fields into production, which its rivals say is superior to that of Centrica.

Venture declined to comment yesterday, but the board will now focus on ensuring Centrica follows due process to ensure shareholders are treated fairly.

Centrica also declined to comment. It cannot declare its offer unconditional until the recent share trades have been settled, expected to be on Thursday.

The takeover could have implications for the rest of the UK North Sea. While experts predict the basin will see major consolidation in the coming years, Venture was the most substantial acquirer of smaller assets.

Nathan Piper, an analyst with Royal Bank of Canada, said yesterday that London-based Premier Oil, which bought distressed Canadian rival Oilexco earlier this year, could fill the gap. Premier acquired significant tax losses in the deal, and the best way to take advantage of the losses was to increase its production, he said.

Meanwhile Wagstaff, who is likely to leave Venture as a result of the deal, could emerge in another company.

A North Sea executive told The Scotsman last week that while he had failed in his defence, he had made strong long-term returns for shareholders and investors may seek to back Wagstaff in a new consolidation vehicle.