Medco mulls bond issue to finance acquisition program

Publicly listed energy company PT Medco Energi Internasional is planning to issue up to Rp 1.8 trillion (US$1=Rp9,060) worth of bonds, in which part of the proceeds will be used to purchase shares in Australian oil and gas company Novus Petroleum Ltd, the Bisnis Indonesia newspaper reported in its Monday edition.

The Surabaya Stock Exchange (SSX) director T. Guntur Pasaribu said Medco last week signed preliminary contract for the listing of the planned bonds on the exchange.

“Medco is planning to issue a maximum Rp1.8 trillion bonds. Some part of the proceeds of the bond will be used to buy a stake in Novus oil company,” Guntur told the Bisnis in Jakarta on Sunday.

As far as the underwriters are concerned, according to Guntur, PT Mandiri Sekuritas, PT Indopremier Sekuritas and PT UOB Securities will work as underwriters for the bond issue.

The efforts to contact Medco director of finance Sugiharto and the head of investor relations Gamala Katoppo failed, the Bisnis said.

Earlier, Medco’s efforts to issue US$100 million bonds overseas to finance the acquisition of Novus did not materialize.

Medco has recently decided to raise its bid to acquire Novus to counter a takeover bid by Australian-based Sunov Petroleum Pty.

In a statement to the Australian Stock Exchange (ASX) on Friday, Medco said it had raised its bid for Novus to A$1.90 per share from A$1.74. The company had earlier extended its bid for the sixth time without increasing its offer.

In total, Medco's latest bid for all the issued ordinary shares in Novus will be worth about A$350 million (about US$260 million), up from its previous bid of A$320 million.

The bid offered by Medco is higher than that of its rival Sunov, which on April 22 raised its bid to A$1.85 per share, or A$341 million, from A$1.77 or A$326 million.

Sunov was jointly set up by Novus managing director Bob Williams and Hong Kong-based Crosby Capital Partners.

Medco said that its bidding price and conditions were a better deal for Novus shareholders than what was offered by Sunov.

"Sunov's latest bid remained subject to a number of conditions, and accordingly any Novus shareholders accepting the bid currently have no certainty that they will be paid the consideration being offered by Sunov," Medco said.

The offers from both Medco and Sunov, however, are still below the price valued by independent appraiser Grant Samuel & Associates, which valued Novus shares at between A$1.96 and $2.75 a share.

Medco has appointed UBS AG to advise it in the takeover plan, while Sunov is being advised by Macquarie Bank Ltd., and Novus by Merrill Lynch. (*)