The largest international deal by a Spanish company in the last five years, props up shares despite plummetting international oil prices.
Talisman Energy Inc. has agreed to be acquired by Spain's Repsol SA in an 8.3-billion-dollar (plus debt) deal that has been unanimously approved and recommended by the Boards of Directors of the two companies, in what became the largest international deal by a Spanish company in the last five years.
Talisman shares were up about 47 percent just after the markets opened Tuesday.
”The acquisition will be financed with cash essentially obtained from the recovery of value from YPF following its expropriation [by Argentina] (US$6.3 billion) as well as other sources of liquidity available to the company, the Spanish firm said in a press release.
Under the deal, Repsol will pay $8 for each Talisman share. Debt included, the total value of the deal is about $13-billion. The transaction, which is still subject to the approval of the Canadian courts and Talisman shareholders, is expected to be complete in mid-2015 with a Plan of Arrangement.
“This is a transformative and exciting deal which will make us one of the world’s most significant players and which will allow us to grow as a company and reinforce Repsol as a solid and competitive integrated player,” said Antonio Brufau, Chairman of Repsol.
At the other end of the table, Talisman chairman Chuck Williamson said in a statement that This deal creates significant and immediate value for Talisman stakeholders and underscores Repsol's strong belief in the high quality portfolio that Talisman has worked hard to develop.
The combined company is expected to produce 680,000 barrels of oil equivalent a day, a 76-per-cent increase to Repsol's current output, and have a presence in more than 50 countries. Its workforce will number 27,000, according to Talisman sources. On the Repsol front, it was also disclosed that the firm expects to boost its reserves by 55 percent, to more than 2.3 billion barrels of oil equivalent.
Analysts quoted by the Calgary-based The Globe and Mail were anyhow skeptical about the future of the merger. Richard Griffith of Canaccord Genuity Ltd. from London, UK, pointed out that the initial reaction was lukewarm. He added that after the transaction was announced, nobody was congratulating them [the Repsol management] on the deal, which is unusual”. He added that “in terms of strategic fit, you wouldn’t describe [the Talisman acquisition] as perfect.”
Meanwhile, BMO Capital Markets specialist Brendan Warn said Repsol is “taking a bullish view on the oil price recovering” and paying “definitely a healthy premium compared to other transactions in Canada.”