More good news for BW Energy

I have a decent chunk of my portfolio in BW Energy, which is an offshore production growth oil play I have written about several times.

Pareto notified its clients this morning that BW Group acquired an additional 22.5% stake in BW Energy from BW Offshore at a 17% premium to Friday’s close (NOK 32/share).

This brings BW Group’s stake in the company to nearly 75%, as the company has continued open market purchases.

Recently, BW Group was required by Norwegian law to make an offer for all minority owned shares in BW Energy after their stake passed 40%. They will be required to submit another offer after their stake passes 75%.

While some are speculating that BW Group can force a buyout at 75%, I find it very doubtful that BW Group, which has a number of public companies with essentially the same investor pool, would be abusive to its shareholders. I think this is evidence that the value continues to increase for the company. Pareto continues to have a 37 NOK price target on the shares and serves as an advisor to the independent directors. Pareto recently provided a fairness opinion on the recent mandatory buyout offer of 27 NOK and advised minority shareholders and independent directors to hold out for a better offer.

The trading price of BW Energy shares are at 28.5 at the time of writing. Today’s transaction represents a 14% premium to the trading price. Pareto’s price target represents 30% premium to the trading price.

I remain long BW Energy.