By Christopher Bjork
MADRID-- Repsol SA is preparing an US$8.3 billion bid for
Canada's struggling Talisman Energy Inc., a takeover that would
roughly double the Spanish company's oil output right away and
boost its potential for further expansion.
The Madrid company's board met Monday evening and unanimously
approved the offer, which has an enterprise value of $13 billion
including debt. Repsol said it was preparing to offer $8 a share
for Talisman, a significant premium over the Calgary-based
company's closing price Friday.
A spokesman for Talisman had no immediate comment on the bid
Monday afternoon. In New York, Talisman rose 19% to $5.12. But the
shares are still down about 56% so far this year.
A takeover of Talisman would allow Repsol to control assets that
include oil rigs in the North Sea and off the coasts of Indonesia
and Malaysia, and shale acreage in Texas, New York and Alberta.
Taking on Talisman's 2,809 employees would nearly double
Repsol's exploration and production staff. While the Spanish
company has a market value five times as big as Talisman's, it
remains a tiny competitor in oil production and for more than a
year has been shopping for an acquisition that would bolster its
production capacity.
Historically a refiner, Repsol has in recent years acquired
stakes in several of the world's largest oil finds. But its
production unit lacks the scale and expertise needed to develop
promising fields offshore in Brazil and the Gulf of Mexico.
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.
Repsol, meanwhile, is cash rich and short on assets. It received
$5 billion in compensation for the 2012 expropriation of its
Argentine unit YPF SA, and last year sold its liquid-natural-gas
unit.
The sharp slide of oil prices is "a great opportunity for anyone
who is liquid, and has not been hurt too badly by this drawdown,"
said Michael Hulme, a fund manager with Carmignac Gestion who
manages a commodities fund with ownership in several U.S. and
Canadian oil and natural-gas explorers. "There is a state of
near-panic among many oil producers, particularly in the U.S.," he
said, and a "tableau of middle-ranking oil companies in situations
of potential stress."
Repsol and Talisman first flirted with a deal during the summer,
but talks cooled because of differences over price. As oil prices
sank, Repsol started to look elsewhere for a deal, while Talisman's
share price sank.
In early November, Repsol's chief financial officer, Miguel
Martínez, signaled to investors that the company was still keen to
make an acquisition, and that it expected the oil-price plunge to
serve up better opportunities.
Around that time, with oil prices in free fall, Talisman put out
new feelers with Repsol, asking whether the company would be
willing to resume talks on a deal, according to a person familiar
with the talks.
Repsol demurred before agreeing and talks moved quickly over the
past 10 days. Repsol executives traveled to Calgary last week to
discuss a potential bid.
On Monday, Repsol's board approved its offer. By that time,
Talisman had lost more than half its market value from the start of
the year. Oil prices had fallen more than 45% and remained close to
multiyear lows.
Chester Dawson in Calgary contributed to this article.
Write to Christopher Bjork at christopher.bjork@wsj.com
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