By Christopher Bjork
MADRID-- Repsol SA reached an agreement with Talisman Energy
Inc. to acquire the Canadian company for US$8.3 billion, a deal
that nearly doubles the Spanish company's oil output right away and
boosts its potential for further expansion.
The deal has been unanimously approved and recommended by the
boards of the two companies, Madrid-based Repsol said Tuesday.
Calgary-based Talisman confirmed the planned all-cash purchase.
Repsol agreed to pay $8, or 9.33 Canadian dollars, for each
Talisman share, a 60% premium to the average price over the past
month, Talisman said. Repsol will assume $4.7 billion in debt.
The purchase is expected to close by mid-2015.
Taking on Talisman's 2,809 employees will nearly double Repsol's
exploration and production staff. While the Spanish company has a
market value five times as big as Talisman's, it has been a tiny
competitor in oil production and for more than a year has been
shopping for an acquisition that would bolster its production
capacity. The addition of Talisman will increase Repsol's output by
76%, to 680,000 barrels of oil equivalent per day, and boost
reserves by 55% to more than 2.3 billion barrels of oil equivalent,
Repsol said.
"This is a transformative and exciting deal," said Repsol
chairman Antonio Brufau. The Canadian firm will add "experience and
proven track record in producing oil" to help the Spanish firm
extract crude oil from deep water fields where it has recently
found oil, he said.
The purchase is the largest made by any Spanish company in the
past five years and will make Repsol one of the 15 largest
privately owned oil and gas companies in the world, the company
said.
A near-halving of oil prices since June has squeezed smaller
energy companies, which are recording dwindling revenues and
struggling to fund new exploration. Talisman is no exception; the
firm had seen its share price more than halve since the beginning
of the year.
Repsol, meanwhile, has been cash rich and short on assets after
its Argentine unit YPF SA was nationalized more than two years ago.
It looked at more than 100 assets worldwide before settling on a
deal with Talisman. Repsol will finance part of the Talisman
purchase with the $5 billion it got in compensation from
Argentina's government for YPF.
The deal will sharply increase Repsol's exposure to North
America, where it will assume Talisman' shale acreage in Texas, New
York and Alberta. Talisman also owns oil rigs in the North Sea and
off the coasts of Indonesia and Malaysia. Offshore production
experience will come in handy for Repsol, which lacks expertise in
this area and has made several large oil finds in deep waters
outside Brazil and in the Gulf of Mexico in recent years.
Repsol and Talisman flirted with a deal during the summer, but
talks cooled because of differences over price. As oil prices
plunged in the autumn, Repsol started to look elsewhere for a deal,
while Talisman's share price sank.
Then, about a month ago, Talisman put out new feelers with
Repsol, and talks moved quickly in the past 10 days, according to a
person familiar with the talks.
JP Morgan advised Repsol, while Goldman Sachs and Nomura advised
Talisman.
Write to Christopher Bjork at christopher.bjork@wsj.com
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