CALGARY—Talisman Energy Inc. says it has agreed to be purchased by Spanish energy giant Repsol S.A. in a transaction worth about US$13 billion.
Under the agreement, Repsol will acquire all outstanding common shares of the Calgary-based company at US$8 each.
Talisman shares had closed Dec. 15 at US$5.97 on the Toronto Stock Exchange (TSX), up more than 18 per cent.
The purchase price, which includes Talisman’s debt, represents a 75 per cent premium to the seven-day volume weighted average share price.
The Financial Times had reported Repsol was looking at a bid for Calgary-based Talisman of between US$6 and US$8 per share.
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.
Completion of the transaction, which is targeted to close in the second quarter of 2015, is subject to customary closing conditions, including court approval.
“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.”
“Talisman has strong operational capability, a highly skilled work force and we look forward to leveraging their expertise as we partner to create a stronger, more profitable and competitive organization,” said Repsol chairman Antonio Brufau.
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 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.
According to a Bloomberg report, the Canada Pension Plan Investment Board (CPPIB) was also said to be weighing a bid for Talisman.
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 on Monday, 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 United Kingdom 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.
Last week, Edward Jones analyst Lanny Pendill said Talisman’s bargain stock price—around US$4 before the takeover talk heated up—increased the chances of an all-out takeover panning out.
“Obviously the North Sea assets are the Achilles heel here and that could be a stumbling block, but that may have been more of an issue when the stock was at $10 (to) $11,” Pendill said.