Australian junior Far Ltd saw its share price jump in early trade as one of its largest shareholders revealed it would reject a A$45 million (US$32.1 million) takeover bid by a recent investor in the company, Samuel Terry Asset Management.
Samuel Terry Asset Management, which holds a 4.9% interest in Far, tabled an all-cash takeover offer earlier this week, seeking to acquire all the issued fully paid ordinary shares in Far for A$0.45 cash per share.
However, on Friday Far revealed major shareholder Meridian Capital International Fund (MCIF), which holds a 19.28% stake in the company, would be rejecting the offer.
In a letter, MCIF noted Far’s position earlier in the week that it believed the offer undervalued the company, noting the company’s cash backing and the right of Far to receive a US$55 million contingent payment from last year’s sale of the company’s interest in the Rufisque, Sangomar and Sangomar Deep (RSSD) project, offshore Senegal, to Woodside Petroleum.
“MCIF rejects the Offer at the Offer Price as being opportunistic and wholly inadequate. In particular, in MCIF’s view, the Offer does not offer shareholders any benefit from the RSSD Contingent Payment,” MCIF said in the letter.
The fund added that it remained “committed to its investment in Far”, while also suggesting the directors of Far should convene a meeting of shareholders to consider a distribution of all rights to the RSSD contingent payment to shareholders pro-rata to their existing equity shareholdings.
“In MCIF’s view, that course of action or any similar arrangement approved by shareholders would help preserve the value of the RSSD Contingent Payment for existing shareholders on the relevant record date. All other assets including Far’s cash and oil and gas interests would remain within Far,” MCIF concluded.
Far said Friday that it was investigating whether it could carry out the pro-rata distribution of rights to the RSSD contingent payment “in an appropriate way”, adding it would provide an update to shareholders once the investigation was complete.
Share price rally
Far’s shares rose to A$0.64 each in early trade following the announcement, a 9.4% jump on Thursday’s closing price of A$0.585 per share.
Far has seen its share price rise steadily rise from a closing price of A$0.365 per share on 28 January, the last day of trade prior to the A$0.45 per share offer.
While the shares are on an upward trajectory, they are still a long way off their most recent highs of A$13.50 per share in November 2018, however, they took a dramatic tumble to A$6.70 per share in December the same year following the results of the unsuccessful Samo-1 exploration well, the first wildcat to be drilled off The Gambia in more than 40 years.
The company then hit more turbulence in early 2020 as it struggled to find funding for its share of costs of the Sangomar development, offshore Senegal, amid the Covid-19 pandemic and declining oil price.
More recently, the company’s unsuccessful Bambo-1 exploration well offshore The Gambia it drilled with Malaysian oil giant Petronas towards the end of last year also resulted in another tumble of the company’s share price.
While it exited its operations in Senegal following the sale of its 15% stake in the RSSD joint venture to Woodside, Far still has offshore acreage in The Gambia, Guinea-Bissau and Australia.