Gas producer Venture snuffs out £1.3bn Centrica bid

British Gas owner Centrica has had its £1.3bn bid for Venture Productions kicked back.

Last Updated: 31 Aug 2010

The 845p a share offer was unanimously rejected by gas production business Venture’s other major shareholders, according to chief exec Mike Wagstaff. ‘We have spoken to our large shareholders and they all want more than 900p, and in some cases they are talking about more than 950p and more than £10.00’ he said. Centrica’s offer was opportunistic and undervalued the company, he added.

So stick that in your balanced flue and smoke it, in other words. In reply Centrica has said that it will not increase its offer unless another company makes a counter bid. But that may not to be the end of the story – Centrica already owns nearly 30% of Venture, having bought out 3i’s stake. We would not be surprised to see it back for another bite at the cherry.

Why? Well, things in the energy business are warming up, what with climate change, the energy gap and the more or less universally accepted view that Peak Oil is only a few years away at most.

Founded in 1997, Venture’s business model is based on buying up ‘previously enjoyed’ gas fields, no longer sufficiently productive to interest the majors, at bargain prices. It then uses its technical know-how to squeeze another lease of life out of them. Very thrifty we think you’ll agree.

As for Centrica, currently it only produces around 20% of the gas it sells - acquiring Venture would more than double that and add significantly to its reserves, to boot. Although it’s clearly trying to bag a bargain in the current bear market, on reflection the company may well decide that Venture is unlikely to get any cheaper than it is now. It may thus be worth paying a bit more for it today against the likelihood of a substantially increased value tomorrow.

Elsewhere in the energy business, a report from the Fuel Poverty Action Group says that rising gas and oil prices will push hundreds of thousands more into fuel poverty in the UK. Fuel poverty is defined as spending more than 10% of household income on energy, and there are apparently some 4m households which fall into that category already. Average price rises of 25% over the last five years and increasing unemployment are largely to blame, it says.

Given that the government is warning that prices will probably rise further, not least as our commitment to renewables will inevitably raise costs, this is not an issue that is going to go away. But it does all tend to suggest that the energy business is going to be a good on to be in for the foreseeable future. Centrica boss Sam Laidlaw may well have cause to mull over that old saw ‘nothing Ventured, nothing gained’ in the days to come…


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