Calgary-based Berkley Petroleum Corp. unanimously rejected the takeover bid last week by a Hunt Oil Co. subsidiary, which offered to purchase all of the common shares of the company for $10 per share. Analysts were meanwhile speculating that without a white knight, Berkley might be worth more if it’s broken up and sold.

Dallas-based Hunt offered to buy Berkley in late December for C$1.4 billion, including debt, or about C$10 a share in cash for each Berkley share. In retaliation, Berkley opened its data rooms earlier this month to other potential buyers and adopted a shareholder rights plan to give its board enough time to generate competing bids and alternative proposals (see NGI, Jan. 8). Management said it would not rule out any alternatives.

Alan Pettie, chairman of Berkley’s special committee set up to review the offer, said the Hunt offer did not “provide fair value for the common shares and is inadequate because it fails to recognize the underlying value of Berkley and its significant upside potential. After carefully reviewing the Hunt Oil offer, Berkley’s board unanimously recommends that shareholders reject the offer and not tender their common shares.”

Specifically, Berkley said that Hunt had failed to recognize the value of Berkley’s reserves; its development and exploration inventory in Canada and California; its “desirability” in natural gas weighting; its strategic value as “one of the few remaining public Canadian oil and gas companies of its size and quality; and the “substantial” value of its tax pools.

Calling the bid “an attempt by Hunt Oil to acquire Berkley to benefit its own interests for less than the fair value of its common shares,” the board said it believed it could generate a “higher value alternative” that would benefit the company.

At the top of some analysts’ lists for Berkley is the possibility of breaking the company up.

“Most boards and independent committees will want to look at all alternatives, including a breakup when there’s a cash bid for all the equity on the table,” said Peters & Co. Chairman Michael Tims, who is one of Berkley’s financial advisers. “The first priority is finding a white knight to put a superior offer on the table, but that would have to be weighted against what that kind of thing would look like.”

Analyst Jim Doak, managing partner with Enterprise Capital Management in Toronto, said last week that Berkley might be worth more to all parties if it is broken up and sold in parts. He said that while Hunt would want to keep some of the assets, it might be better for both companies to work out a deal to “merchant bank” the buy.

Another idea proposed by analyst Jeff Fiell with Calgary-based Canaccord Capital Corp. would be for Berkley to create a royalty trust from its producing assets and then spin off the other assets into exploration.

“Certain parts of Berkley lend themselves to a royalty trust-type arrangement and other assets lend themselves better to high-impact that would have a material impact to a large company,” Fiell said.

Berkley’s assets include properties in the Northwest Territories and California, where it holds a gas play in the East Lost Hills near Bakersfield. It also has oil production assets in Saskatchewan and natural gas properties in northern Alberta. Carolyn Davis, Houston

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