Cairn buys second North Sea firm in $644 million deal

Wed Jun 13, 2012 6:05am EDT
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By Sarah Young

LONDON (Reuters) - British oil firm Cairn Energy (CNE.L: Quote) said it agreed to buy UK-focused Nautical Petroleum NPE.L for 414 million pounds ($644 million), its second North Sea acquisition as part of a move to balance its high-risk exploration strategy in Greenland.

News of the offer sent Nautical shares soaring 54 percent to 460 pence, above the Cairn's 450 recommended cash offer price, signaling that some investors were bet a rival suitor could emerge with a higher bid.

Having failed so far to find oil in Greenland, where it has focused its energies and spent $1.2 billion in the past two years, Cairn said in March that it would look to spend some of its substantial cash pile to build up a business which would start producing oil in the near-term.

Analysts were divided over whether Cairn, which embarked on its new strategy in April when it bought privately-held North Sea firm Agora Oil & Gas for $450 million, could face a battle to secure Nautical.

"Given the level of the bid and the obvious synergies for Cairn we see the chances of a counter offer as relatively slim," analysts at Mirabaud said.

Westhouse analysts disagreed, arguing that Cairn's offer, which represented a 51 percent premium to Nautical's closing price on Tuesday, undervalued the explorer.

"It (Nautical) would be attractive to established North Sea companies looking to consolidate their reserves position and we would highlight Statoil (STL.OL: Quote), Maersk (MAERSKb.CO: Quote), TAQA TAQA.AD, Canadian independents and Kuwaiti National Oil Company as amongst potential counter bidders," they said.

Cairn, however, sits in pole position to acquire Nautical given that it said it had already secured acceptances from investors owning 27.25 percent of Nautical shares.   Continued...