As anticipated in our 02-June blog, Centrica has come up with a GBP 8.45 a share cash offer for Venture Production on 10-Jul-09. The offer was made after Centrica secured the additional 5.4% stake from 3i Group to bring its ownership in Venture to  29%. Although we feel the offer is highly opportunistic - and hence was almost immediately rejected by the Venture board as substantially undervaluing its business- we feel that there is a good chance Centrica's offer might be succesful, given that the offer is subject to receiving valid acceptances in respect of, or otherwise acquiring, such number of Venture Shares as to give it an interest of over 50% of the fully diluted ordinary share capital of Venture. Given its ownership of 29%, Centrica's bid would be succesful if it achieves acceptances of 21% out of 71% (or less than 1/3 of the Venture shares Centrica does not yet own): although Venture's management owns about 10%, the Venture shareholder base is fairly liquid, with funds like Legal & General who own 4.36% and almost entirely consisting of index tracker funds who will be more inclined to accept any (even opportunistic) offer.  

Although Centrica stated that it would not raise its 845p offer (stating it was its final offer) and Venture management will do its best to fight off the offer, we believe there is a chance –albeit smaller- that Centrica would pursue a friendly deal and might increase its 845p offer.  Hence we recommend buying Venture shares under the 845p bid level.