The deal, announced after the market closed on Tuesday, involves Woodside doubling its share base to acquire BHP's oil and gas arm in a nil-premium merger to create a roughly A$40 billion company.The merger, expected to be completed in mid-2022, will double Woodside's output and market capitalisation.Some analysts praised the deal, saying the share price drop reflected worries about a stock overhang as many BHP shareholders who want out of fossil fuels may dump the shares.
"However, we emphasise Woodside 2.0 will be more attractive fundamentally, and our recommendation could become significantly more positive once the market digests the new deal and the new shares," CLSA said.Fund manager Van Eck Australia questioned the value of the merger and said it may have difficulty winning approval from Woodside shareholders.
The shares partly recovered in morning trade to be down 2.1% in a flat broader market. The stock had already fallen 5% since speculation started swirling in July about a potential merger with BHP petroleum involving a huge issue of shares.Woodside earlier reported a 17% rise in first-half underlying profit on a rebound from last year's pandemic-hit oil prices, but missed broker forecasts and trimmed its annual production outlook.
The company trimmed the top end of its annual production outlook to 93 million barrels of oil equivalent from 95 mmboe, implying a drop of at least 7% from last year's record output.
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