Harbour Energy PLC (LSE:HBR)’s share price climbed a further 5% on Friday as the City gave the thumbs up to its $11.2bn acquisition of Wintershall.
Analysts at Jefferies said the deal was “very compelling,” while the team at Bank of America said it “surpasses expectations.”
“Harbour’s proposed acquisition with Wintershall Dea has defied market expectations of what was possible from its stated M&A ambitions,” BofA said in a research note.
“To us, diversification from the UK and its associated fiscal uncertainty was always the major route to re-rating Harbour’s muted valuation,” it added.
“Yet we acknowledge that the company has achieved a feat of such scale, necessitating the use of equity, without major dilution to existing shareholders,” it continued.
BofA pointed out that Harbour would move from near UK pure-play status down to around 25% production exposure whilst at the same time upgrading its credit metrics and reducing its cost of debt, if the proposed deal materializes.
BofA has a buy rating and 460p price target.
Barclays noted the deal marks the fourth major acquisition in the group's history and as CEO Linda Cook states is the "most transformational step yet in our journey."
It explained that a key part of the Harbour investment case has been to deliver value through acquisitions.
The bank highlighted that Harbour anticipates an increase in the dividend of 5% per share upon completion, with the "potential for additional returns" post completion over and above the base dividend.
Barclays also highlighted comments on the conference call after the deal was announced from Cook who stated that Harbour remains well placed to look for further potential opportunities, but that this needs to be done with “discipline and patience. “
Cook said on the call "nothing else could compete" with the Wintershall transaction when looking at other opportunities presented in the recent past.
Barclays rates Harbour Energy ‘overweight’ and Jefferies has a ‘buy’ rating.