The Intelligent Investor Growth Fund is listing on the ASX. Initial Offer now open

Walker scores big as gas partner turns predator

Reclusive Sydney property developer Lang Walker has one up on BHP's Marius Kloppers: he's already turned a handy profit from shale gas.

Reclusive Sydney property developer Lang Walker has one up on BHP's Marius Kloppers: he's already turned a handy profit from shale gas.

While his version was more modest than Kloppers's grand vision, Walker nevertheless has plucked some spectacular returns on his investment in a relatively short time.

He's also avoided the obvious problems associated with speculative resource ventures by never actually digging a hole.

But his involvement in a suddenly hostile $94 million takeover of resources minnow Adelaide Energy, in which until recently Walker was the major shareholder, by Beach Energy has created controversy and raised the hackles of those running Adelaide.

Adelaide was listed four years ago at 20?, a few months before the stockmarket tanked and life became a struggle for resources tiddlers. Its share price has never risen above its listing price and has dropped as low as 4? during the dark days of the financial crisis in 2008 and 2009.

Since, however, it has largely tracked the performance of the ASX energy index, although its movement has been more extreme with the stock fluctuating between 6? and 17? during 2010.

While it earns some cash from an Otway Basin gas facility in Victoria, its focus is on the Cooper and Eromanga basins in central Australia where it has a highly prospective shale gas area ,which managing director Carl Dorsch describes as "Australia's premier shale gas province".

Known as the Nappamerri Trough, the area is the subject of a nascent drilling program in partnership with Beach Energy, which is also the operator. Given Adelaide has only a 10 per cent interest in one layer of the tenement and a 20 per cent interest in another layer, it would make sense for Beach to consider a takeover.

Until a little over a month ago, however, matters appeared to be heading in an entirely different direction.

Rather than hostile manoeuvres, both companies appeared to be cozying up to each other, forming a strategic alliance midway through the year to pursue their joint venture gas interests.

In August, Beach agreed to invest just under $10 million in Adelaide through several share placements at 16.5? a share, a reasonable premium to the prevailing price.

It also agreed to invest a further $30 million within the next five years, via unlisted options at 40? a share. This represented a serious lift on Adelaide's recent share performance.

Some time after this point, unbeknown to the board and management at Adelaide, the dynamics of the relationship between the two companies suddenly shifted.

While investors approved the share placements at the extraordinary meeting in September, the options deal was knocked back following a resounding "no" vote despite a recommendation from directors.

Adelaide, in a desperate effort to cement the relationship, then recast the deal. To compensate for the lost options, it arranged for an extra share placement for Beach whereby it tipped in a further $10 million at 16.5? a share, taking its stake to just under the 19.9 per cent takeover threshold.

Completed only on October 5, it was a deal that would seal their fate.

For last week, out of the blue, Beach launched an on-market, hostile, 20c-a-share takeover bid for Adelaide. Hostile takeover bids are rare these days, with most deals proceeding down the agreed-takeover path via a scheme of arrangement. As for on-market bids, they are almost unheard of.

Lang Walker's role in proceedings leading up to the surprise attack is unclear. But he has been a major shareholder in Adelaide Energy for several years, with a stake hovering between 17 per cent and to a level just under the takeover threshold.

Within three days of the bid being unleashed, Beach Energy had Adelaide Energy stitched up. Walker wasted no time in offloading his stake and delivering control of the company to Beach in exchange for $15.8 million.

Exactly what is his entry price is unknown but it is believed he bought into the company some time after September 2009 when the share price was fluctuating wildly.

Walker held his shares through the Auckland Trust Company Ltd (in capacity as trustee for Second Pacific Master Superannuation Fund), suggesting the stock was held in his superannuation account.

If he managed to pick the lows, Walker would have made a substantial profit on the takeover during a period when most stock investors have suffered huge losses on the general market. Walker has a reputation for sniffing a bargain. He used to tool around town in a Bentley owned by failed tycoon Russell Goward. One of his first massive motor yachts - all named Kokomo - was bought from the wreckage of Keith Williams's failed Hamilton Island venture.

And on Christmas Day 1993, he famously fronted to the smoking ruins of the Offset Alpine printing plant - later to play a key role in flamboyant sharebroker Rene Rivkin's fall from grace - and offered to buy it.

But he is best remembered, through gritted teeth by many, for his property development group Walker Corporation.

Floated in March 1994 at $1.55, the company catapulted Walker into the rich lists. But his shareholders endured years of pain as the stock relentlessly headed south. Its first annual report was greeted with a barrage of questions by the stock exchange over myriad related party transactions.

But when the NSW Supreme Court's Justice Einstein in 2000 ruled that Walker breached a promise to a former partner that he would use his best efforts, including his political connections, to try and have a large parcel of land rezoned for housing, the property tycoon eased out of public life. Until last week, that is.

Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles