Novus says bidders need to raise offer

A senior executive at Novus Petroleum Ltd. said Monday that suitors for the Australian oil and gas company need to bid at least 5% more than the current highest bid to win over directors, Dow Jones reported.

Michael Royle, chief financial officer at Novus, told Dow Jones Newswires that two existing bids from investment company Sunov Petroleum and Indonesia's PT Medco Energi Internasional significantly undervalue the company.

Since the launch of Medco's hostile takeover bid late December, Novus' share price has averaged A$1.85, which sets a benchmark for a successful bid, Royle said in an interview.

"That is a minimum benchmark for someone making a bid or lifting their offer," Royle said.

"And maybe it would need a little bit more to get a recommendation (from directors)," he added.

Shares in Novus closed down a cent, or 0.5%, at A$1.88 on Monday.

Independent directors of the company, including Chairman David Blair, have urged shareholders to reject both bids, citing an independent expert's opinion that neither were fair nor reasonable.

Royle is one of three senior Sydney-based executives advising the independent directors on the bidding war.

Sunov, a private company associated with Novus Chief Executive Bob Williams, is offering A$1.77 a share, valuing Novus at A$331 million.

A bid pitched at A$1.85 a share would still fall well short of an independent expert's valuation for Novus of A$2.02 to A$2.86 a share.

"If they (Novus or Medco) come up with a price closer to that independent valuation range, while it may not be fair, it may be deemed as reasonable," Royle said.

Medco is offering A$1.74 a share, and is considering whether to raise its bid.

Both bids close later this month.

Given there are two "live offers" for Novus, competitive tension may result in either Medco or Sunov raising its offer price, Chairman Blair said last week.

"Additionally, the independent directors have widely canvassed alternative counter-bidders and...those discussions remain ongoing," he added.

But Sunov said Friday that it was "unrealistic" to expect a third bidder to trump the existing offers.

"We believe that if there were other bidders, they surely would have emerged by now ...," said Ilyas Khan, a director of Sunov.

Royle said talks are continuing with third parties and didn't rule out the possibility of Australia's Santos Ltd. "coming in down the track."

Last month Santos agreed with Sunov to buy Novus' Indonesian and Cooper Basin assets for up to US$202 million, but the deal is conditional on Sunov's bid succeeding.(*)