Talisman Energy Inc. based in Calgary says it has agreed to be purchased by Spanish energy giant Repsol in a transaction worth about $15.1 billion Cdn ($13 billion US).
Under the agreement confirmed early Tuesday by Talisman, Repsol will acquire all outstanding common shares of Talisman at $9.33 Cdn ($8 US) each. Repsol will also take on about $5.48 billion Cdn ($4.7 billion US) of debt.
Talisman shares soared 47 per cent on Tuesday to $8.80 after closing Monday at $5.97 Cdn on the Toronto Stock Exchange. Over the last five days, Talisman shares have gained 82.95 per cent on takeover rumours. Last week, Talisman confirmed it was again in talks with Repsol that had been circling the Calgary company since this summer.
The falling price of oil has made Talisman a cheaper takeover target. Its stock is down 28.7 per cent over a year ago and was around $12 when Repsol first became interested.
The purchase price, which includes Talisman's debt, represents a 75 per cent premium to the seven-day volume weighted average share price.
Board supports deal
Also under the deal, Talisman will pay aggregate cash dividends of 18 cents per common share prior to closing. The Talisman board is recommending shareholders accept the deal at a special meeting to be held in mid-February 2015.
Talisman CEO Hal Kvisle says the Repsol deal is the best possible outcome for shareholders and he expects the deal will receive federal approval.
"The board considered in detail other alternative options and this transaction was viewed as superior to all other options available to the company," he said.
The Canada Pension Plan Investment Board was said to be looking at a deal with Talisman, according to a Bloomberg report.
"This deal creates significant and immediate value for Talisman stakeholders," said board chairman Chuck Williamson.
"Repsol is a world-class operator with a solid track record and the financial capability to continue the development of these assets within their international portfolio."
Repsol hastened to assure Calgary that it would remain a key centre for operations. Calgary will be home to one of Repsol's largest management offices, and Talisman's Canadian assets will continue to be managed locally, the company said.
"Repsol has the track record and financial flexibility to accelerate the development of Talisman's oil and gas assets, which will provide tangible and immediate benefits for Canada and create meaningful opportunities for employees, while retaining Talisman's talent in Canada, Repsol chairman Antonio Brufau said.
Repsol is an oil and gas giant with a presence in more than 30 countries, employing more than 24,000 people. The combined company will be among the 15 largest privately-owned oil and gas companies with activity in more than 50 countries and more than 27,000 employees.
Repsol boosts output
Repsol said Talisman's incorporation will increase Repsol's output by 76 per cent to 680,000 barrels of oil equivalent per day, and boost reserves by 55 per cent.
Analysts have predicted the pace of mergers and acquisition in the oil patch will pick up as low oil prices put pressure on some names, especially those with high debt loads.
U.S. benchmark crude for January delivery dropped below $56 US on Monday and was trading at $55.24 US a barrel on Tuesday. It down more than 47 per cent over the past six months.
Talisman, which over the past few years has been striving to better focus its global portfolio, has long been the subject of takeover speculation.
While its offshore assets in Southeast Asia and its position in several North American shale regions are seen to be attractive to potential bidders, its holdings in the U.K. North Sea have been cited as a hindrance to any potential deals as they've been prone to unplanned outages and have struggled to meet targets.
An earlier version of this story said the total value of Repsol's deal to buy Talisman Energy was $8.3B Cdn. In fact, the total is $13B US, or roughly $15B CdnDec 16, 2014 7:15 AM ET