King Energy Faces Minority Risk as Whitebark Pursues 90% Takeover Threshold

Whitebark’s Takeover Offer Details

Whitebark Energy Limited (ASX: WBE) has formally launched an off-market takeover bid for all ordinary shares and options in King Energy Limited (King). The offer provides King shareholders with 1.6894072 new Whitebark shares for each King share held, and 3.3333333 new Whitebark options for each King Class A or Class B option. The bid is unanimously recommended by King’s directors, who collectively hold over 22% of King shares and 21% of King options, signaling strong internal support.

Strategic Rationale and Synergies

The merger is positioned as a strategic consolidation to create a more diversified Australian exploration and production company. Both Whitebark and King hold complementary interests in oil, gas, hydrogen, and geothermal projects. King’s Alinya Project in South Australia, prospective for oil, gas, helium, and hydrogen, aligns with Whitebark’s existing Warro Gas and geothermal assets. The combined entity aims to leverage operational synergies, reduce overhead costs, and enhance funding capabilities.

Whitebark highlights the potential to capitalize on Australia’s growing clean energy sectors, particularly white hydrogen and helium, positioning the combined group to meet rising global demand for clean energy and industrial gases. The transaction also offers King shareholders exposure to Whitebark’s experienced board and management team, which brings a proven track record in advancing energy projects.

Financial and Capital Structure Impact

Assuming full acceptance and the exercise of convertible securities, King shareholders would hold approximately 12.24% of the combined group on an undiluted basis, rising to 15.05% on a fully diluted basis. Whitebark plans a capital raising of up to $3 million to fund exploration activities, with new shares and options to be issued accordingly. The offer values King shares at approximately $0.0118 each based on Whitebark’s closing price prior to the announcement, though this value will fluctuate with market conditions.

Offer Conditions and Timetable

The offer is conditional on Whitebark acquiring at least 90% of King shares, among other regulatory and business conditions. The offer period opened on 10 February 2025 and is scheduled to close at 5:00pm WST on 10 March 2025, subject to extension. King’s directors have agreed to accept the offer in the absence of a superior proposal, and no competing bids have been disclosed.

Risks and Considerations for Investors

Investors should consider risks including the conditional nature of the offer, potential fluctuations in Whitebark’s share price affecting the value of consideration, and integration risks post-merger. Remaining King shareholders who do not accept the offer may become minority holders with reduced liquidity. Tax implications, including potential capital gains tax rollover relief, are also outlined in the bidder’s statement.

Whitebark’s board emphasizes that the offer provides King shareholders with an opportunity to participate in a larger, more liquid entity with enhanced strategic positioning in the evolving energy market.