Talisman shareholders approve sale to Repsol
Shareholders vote in favour of $13-B US deal
Calgary is set to lose another major oil and gas company headquarters as Talisman Energy moves one step closer to being acquired by Spanish energy giant Repsol.
Shareholders voted in favour of the $13 billion US deal this morning at a meeting in downtown Calgary, with 99.36 per cent of shareholders voting yes.
Repsol will acquire all outstanding common shares of Talisman at $8 US each ($10 Cdn). The transaction is expected to close in the second quarter of this year.
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While the vote was nearly unanimous, not everyone was pleased with how the company's fortunes have tumbled over the last decade. Shareholder David Saunders expressed his displeasure with the Talisman board and executives both past and present.
It wasn't a great company, but it was a very good company and these guys just ran it right up on the rocks- Shareholder David Saunders
"It wasn't a great company, but it was a very good company and these guys just ran it right up on the rocks, it's as simple as that," he said after the meeting.
Talisman CEO Hal Kvisle described the Repsol deal as the best possible outcome for shareholders and he expects the deal will receive federal approval.
"We are well on the path to closing. This shareholder vote today is a very significant event, one step in that process," he said. "We can obviously say this is in the best interest of shareholders."
Calgary losing another head office
Repsol officials have said Calgary will be home to one of Repsol's largest management offices and Talisman's Canadian assets will continue to be managed locally.
"I think seeing a major head office disappear will have an impact on employment, but it is a small impact relative to the much bigger impact of commodity prices that we are seeing all over downtown Calgary right now," said Kvisle.
"We went through a similar situation in the mid-80s and the great company I worked for back then, Dome, disappeared and out of the ashes of that company sprang some of the leading companies in Western Canada today."
That's an interesting example. Dome Petroleum was Canada's largest independent energy company, but made the bet that oil prices would stay high and very nearly collapsed under the weight of its debt. Dome is remembered fondly by oil patch veterans and less fondly by 80s-era shareholders.
Kvisle also said that layoffs are expected, in part because because some of the head office jobs aren't going to be needed anymore, and in part because the drop in the price of oil means cost cutting is necessary.
For its part, the executive management team will do well out of the deal. A total of $28 million has been set aside for five top executives. Kvisle himself is set to receive $15 million for his 30 months at the company. Kvisle was brought into the CEO role at Talisman in September 2012, with express intent of righting the financial ship.
Talisman's share price dropped significantly after crude oil prices began to drop sharply in late November.
"They got, quite frankly, more than a fair deal," says analyst Chris Cox with Raymond James. "There were a slew of issues for Talisman. I think it will be quite the challenge for Repsol to really turn around the story and integrate it into its portfolio and make it a profitable business, a growing business."
Cox suggests Repsol could likely have paid less for Talisman if the Spanish company would have waited longer to strike a deal. He says Talisman is a company with too much debt and lacking focus with its operations around the world, including its money-losing operations in the North Sea.
"They have billions of dollars in decommissioning liabilities associated with that now," he says. "Their North Sea assets and North Sea joint venture are now listed as a liability, not an asset because of how much they need to spend to close down those facilities."
Repsol is an oil and gas giant employing more than 24,000 people in more than 30 countries. The combined company will be among the 15 largest privately-owned oil and gas companies with activity in more than 50 countries.
Talisman was created in 1992 with a headquarters in Calgary.