Fosun to Buy Roc for $442 Million, Spelling Horizon Deal End

Aug 04, 2014 3:22 am ET

(Updates with comment from Horizon in sixth paragraph.)

Aug. 4 (Bloomberg) -- Billionaire Guo Guangchang’s Fosun International Ltd. agreed to acquire Roc Oil Co. for A$474 million ($442 million) in cash, giving the Chinese group assets stretching from Australia to Malaysia.

Shanghai-based Fosun is offering 69 cents a share, 10 percent more than Roc’s closing price yesterday, the Sydney- based company said today in a statement. Roc Chairman Mike Harding said Fosun’s offer is superior to an agreement to merge with Horizon Oil Ltd., while Horizon said it expects Roc to terminate their A$800 million accord. Roc rose 7.1 percent to close at 67.5 cents in Sydney.

Guo’s Fosun, the investment arm of China’s biggest closely held industrial group, has been on a buying spree, ranging from insurance businesses to New York City office buildings. Roc, owner of stakes in projects backed by PetroChina Co. and Cnooc Ltd., received two approaches from potential buyers it didn’t name after announcing the Horizon merger in April.

Fosun will get assets in China’s Bohai Bay and Beibu Gulf, “providing stable upstream income and a learning ground for further exploration in the region as China moves more into offshore production,” Wu Fei, a Hong Kong-based energy analyst at Bocom International Securities, said today in an e-mail.

Horizon shares fell 6.8 percent to 34.5 cents in Sydney. Australia’s benchmark S&P/ASX 200 Index declined 0.3 percent.

Takeover Interest

Horizon Chief Executive Officer Brent Emmett said his company may attract takeover interest based on the price Fosun agreed to pay for Roc. Horizon holds about 27 percent of the Beibu Gulf project, a bigger stake than Roc, he said.

“That would imply a very significant valuation on Horizon Oil,” Emmett said today in a phone interview. “I don’t rule out there might be some takeover interest in Horizon.”

While Horizon has a viable standalone business, the funding of future projects will be more challenging now, John Young, an analyst at Ord Minnett Ltd., wrote today in a note.

Horizon has sufficient funds and wasn’t depending on the Roc merger, Emmett said. Horizon has strong prospects in Papua New Guinea and its balance sheet is in “very sound shape” with cash reserves of about $100 million at the end of June, the company said today in a separate statement.

Allan Gray Australia Pty, Roc’s largest shareholder, supports the Fosun bid unless there’s a higher offer, said Simon Mawhinney, a portfolio manager at the firm in Sydney. Allan Gray had opposed the Horizon accord and fought unsuccessfully for Roc investors to get a vote on the deal.

“Considering the choices available to us, this is a much, much better outcome and significantly closer to a fair price,” Mawhinney said in a phone interview.

The bid is 52 percent more than Roc’s closing price of 45.5 cents on April 23, before the Horizon deal was announced.

--With assistance from Aibing Guo in Hong Kong.