Hancock Energy has upgraded its offer to acquire Warrego Energy Limited (ASX:WGO) after three of four Warrego directors considered Hancock’s offer to be superior to a different offer and recommended in December that Warrego shareholders accept it.

Hancock has increased its initial offer of $0.28 cash per Warrego share to $0.36 per share, payable if Hancock receives acceptances totalling 40 per cent or more of Warrego shares.

As of 3 January 2023, Hancock has received acceptances from Warrego shareholders totalling 25.92 per cent of the shares on issue and so requires acceptances with an aggregate holding of 14.08 per cent to trigger the increase condition.

The maximum amount that Hancock will need to pay if the increase condition is met is $447 million.

A majority of Warrego’s directors recommended the Hancock cash offer over a scrip offer from Strike Energy of one Strike share per Warrego share.

Reasons they provided included Strike’s price fluctuating and trading below Hancock’s offer price and Strike’s scrip offer exposing Warrego shareholders to development risks on Strike’s and Warrego’s assets.

They also noted that Strike’s offer may not deliver capital gains tax rollover relief, requiring Warrego shareholders to cash fund that liability out of their own resources.

Hancock’s offer is scheduled to close at 7pm AEDT on 31 January 2023.