Shares of the Canadian energy explorer Talisman Energy (TLM) jumped over 46% in the pre-market trading session following its confirmation of being acquired by Repsol S.A. (REPYY).
The company announced that the deal involves an all-cash transaction, and the per-share price of the takeover is $8 or C$9.33, a 75% premium to Talisman’s 7-day average closing price. This should be immediately accretive to shareholders. Total value of the transaction is about $13 billion, including Talisman’s current debt of about $4.7 billion.
Talisman added that the boards of both companies have unanimously approved this deal. Also, Talisman stated that if preferred shareholders approve this transaction, they would receive an additional C$25 in cash (apart from $8 per share). Talisman shareholders would also receive any accrued and unpaid dividend against every share they hold. Moreover, the company will be allowed to pay an aggregate cash dividend of 18 cents per share before closure of this deal, which would include the dividend payable on Dec 31.
Talisman announced that its directors and executive officers have already decided to favor the deal and the company urged its common and preferred investors to do the same in its upcoming shareholders’ meeting to be held in mid Feb, 2015.
The transaction, expected to be completed in the second quarter of next year, will result in a combined entity with production capacity of 680 thousand barrels of oil equivalent per day (mboe/d) and refining capacity of 1 mboe/d. The merger will create a global E&P company, which would be better positioned to fully exploit Talisman’s large, undeveloped resource base.
Earlier this year, Repsol had received a $6.3 billion compensation fund for its stake in YPF S.A. (YPF) as the Argentinean government nationalized the firm in 2012. The company plans to use this fund, in addition to other cash options, to finance this transaction.
Talisman also added that if it terminates the transaction, on account of a better proposal, Repsol is entitled to $270 million.
Currently, Talisman carries a Zacks Rank #5 (Strong Sell) whereas Repsol holds a Zacks Rank #4 (Sell). The Zacks Ranks imply that these stocks will underperform the broader U.S. market in the next one to three months.
Better-ranked players from the exploration and production industry include Cheniere Energy, Inc. (LNG) which holds a Zacks Rank #2 (Buy).
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