UPDATE: Venture Rejects Centrica's 845 Pence/Share Offer

U.K. oil and gas producer Venture Production PLC (VPC.LN) late Friday rejected an 845 pence-per-share offer from utility Centrica PLC (CNA.LN) for the remaining 71% stake it doesn't own in Venture.

Centrica's offer, valuing the company at GBP1.3 billion ($2.1 billion), would boost its dwindling base of gas reserves, but Venture's board unanimously rejected it, saying it undervalues the company.

The offer is likely to disappoint some Venture investors who were looking for a bid of around 950 pence. It represents a premium of 7.6% to Friday's closing price.

Centrica said in a statement that it is offering a fair price for Venture, which it claimed is highly exposed to falling U.K. gas prices.

"We are the leading independent gas producer in the North Sea," said Mike Wagstaff, chief executive of Venture Production. "In no way does this offer recognise the strategic position and high quality of our UK gas reserves and resources for which the markets have clearly and consistently established significantly higher values across a number of recent transactions. Our strong financial position enables us to exploit both our existing strategic portfolio and future acquisition opportunities."

Centrica, which services 15.1 million gas and electricity customers, has found itself increasingly exposed to the U.K.'s volatile wholesale energy markets and vulnerable to competition from giant European utilities.

Centrica also Friday increased its stake in Venture to 29% from 23.6%; it had said in March it was considering making a bid for the entire company. It faced a Monday deadline to present a formal takeover offer after buying an initial 22% stake in March.

In an effort to boost its reserves, Centrica has been buying up exploration acreage in Norway, Nigeria and the Caribbean. Most significantly, it boosted its electricity resources by buying 20% of the U.K.'s largest nuclear producer, British Energy, from Electricite de France SA (EDF.FR) earlier this year.

Venture could be an expensive source of gas when viewed in the global context and has high operational and development costs compared with other international opportunities on offer, analysts have said.

Centrica has the cash to close the deal - around GBP1 billion remains from last year's rights issue and GBP650 million in bonds sold earlier this year. It has recently lined up a consortium of six banks to provide around GBP500 million in additional loans to fund any potential Venture bid, people familiar with the matter told Dow Jones Newswires.

The energy retail business of state monopoly British Gas was set apart in the 1990s to form Centrica, while the North Sea gas production and distribution business became BG Group PLC (BRGYY).

-By James Herron and Lauren Pollock, Dow Jones Newswires; 44-207-842-9317; james.herron@dowjones.com

(Selina Williams contributed to this report.)

Venture Production (LSE:VPC)
Historical Stock Chart
From Jun 2024 to Jul 2024