ENI to buy Burren Energy for 1.7 bln

Business Materials 1 December 2007 00:32 (UTC +04:00)

Italy's Eni has agreed to buy oil explorer Burren Energy for 1.736 billion pounds, boosting the oil major's operations in the Republic of Congo and giving it a toehold in Turkmenistan, where a new leadership is warming to foreign investment.

The companies said in a statement on Friday the Burren board had agreed to recommend a 1,230 pence per share bid, after earlier rebuffing 1,050p and 1,200p indicative bids from Eni.

Burren shares closed up 9.37 percent at 1,249 pence -- above ENI's bid, suggesting some investors believed another bidder may emerge.

Other parties, including Korea National Oil (KNOC), have in recent months expressed interest in buying Burren.

However, analysts were sceptical. The agreed price is in line with the 1,200p-1,250p range that most analysts expected ENI to make its best bid.

"I would be surprised if there is a hostile bid," said Richard Griffith, oil analyst at Evo Securities.

One hedge fund manger who asked not to be named said he would like to see a counterbid but said the situation favoured Eni.

"Unless you see a competitive situation, you are not going to see a bump on this," he said.

Speaking on the sidelines of an event in Venice, Italy, Eni Chief Executive Paolo Scaroni said "all the conditions are in place to be optimistic".

William Arnstein at Dresdner Kleinwort agreed Eni was unlikely to be outbid but said while the offer was "good value" for Burren's shareholders, "a bid of 1,320p or above is not out of the question and would not require aggressive assumptions".

Burren said the price offered represented a 50.6 percent premium to the three month average price of Burren shares before the bid.

Like most western oil majors, ENI is struggling to boost production and reserves and the Burren acquisition will help this.

Bankers said Burren was a good fit as Eni operates the M'Boundi field in the Republic of Congo, and the London-based company's 37 percent interest in the field is its most important asset.

Knowing the geology of this key field better than anyone, ENI is better able to assess Burren's true worth, analysts said.

Griffith added that even if another party was prepared to pay more than ENI thought Burren was worth, that party might be deterred from bidding because if they won, they would have to work as a junior partner with a disgruntled Eni on M'Boundi.

Also, Burren's Turkmen assets could be a useful springboard in a country which oil majors are becoming excited about after authoritarian former President Saparmurat Niyazov died last year and was replaced by more reformist Kurbanguly Berdymukhamedov.

Scaroni said there were no current plans for more acquisitions, but the company would be open to any opportunities that created value.

No one was immediately available at South Korea's state-run KNOC to say whether it might consider a counterbid.

Burren was founded in 1994 by Irishman Finian O'Sullivan, the current president, who owns 3.4 percent of the company, according to Reuters data, which would be worth 59 million pounds at the bid price.

Eni shares traded down 0.2 percent at 24.30 euros, underperforming a 1 percent rise in the DJ Stoxx European oil and gas sector index, after a Reuters report that the Kazakh government was seeking $7 billion (3.5 billion pounds) in compensation related to delays and cost overruns at the Kashagan field. ( Reuters )