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Oil Search likely to reject Australia's largest takeover bid

Xinhua, September 9, 2015 Adjust font size:

Australia's oil giant Woodside Petroleum will have to sweeten its takeover bid of Sydney-based Oil Search as the Papua New Guinea-focused oil and gas producer is likely to reject the 11.6 billion Australian dollar all-scrip offer, local media reported on Wednesday.

The bid of Woodside, aimed at building a global gas network amid the collapse in global energy prices, however, greatly undervalues Oil Search's Papua New Guinea liquefied natural gas ( LNG) assets.

According to UBS Wealth Management, Oil Search's stake in the PNG LNG project, which is generating a lot of cash for the company, its expansion and a separate opportunity in the country are among the top three undeveloped conventional LNG projects in the world.

Woodside's offer of one share for every four shares held in Oil Search, announced on Tuesday, implies a premium of around 14 percent based on the companies' closing prices on Monday, or 7.65 Australian dollars per share.

A higher valuation than Woodside's offer is therefore warranted, Fairfax Media reported.

Given the current low point in the global oil price cycle, analysts said a price premium of 25 to 35 percent is more appropriate.

The proposed takeover deal would be Australia's largest since 2011. Endi