Strike Energy to acquire JV partner Talon Energy
Sydney-listed Talon Energy has entered into a binding scheme implementation deed with its joint venture partner Strike Energy under which Strike will acquire all the issued shares in Talon, the company said on August 14. This development comes after weeks of negotiations between the two companies.
According to the terms of the proposed agreement, Strike will acquire all issued shares of Talon, offering Talon shareholders 0.4828 new Strike shares for each Talon share held. This exchange implies an offer price of A$0.212 ($0.14)/Talon share, which represents a premium of 21.4% to the most recent closing price. As a result of the transaction, Talon shareholders will own approximately 11% of Strike.
Talon had earlier this month received A$0.212/Talon share offer but the talks collapsed and Strike withdrew the offer.
Strike holds a 55% interest in the Walyering project in the Australian Perth basin and Talon owns the remaining 45%. Additionally, Talon has a 33% stake in the Gurvantes coalbed methane project in Mongolia.
With the potential for an initial annualised revenue exceeding A$82mn from the Walyering gas field, Talon shareholders stand to benefit immensely from this strategic move, the company said.
Talon said it is also exploring the prospect of demerging its Mongolian project. The spin-out transaction, executed through an in-specie distribution of shares in a new entity, holds the potential to deliver added value to Talon shareholders, pending shareholder approval, it said.
Colby Hauser, Talon's CEO, endorsed the proposed merger. He said, "Upon successful implementation of the scheme, Talon shareholders will not only enjoy an attractive premium for their shares but may also realise additional value through continued exposure to the Gurvantes development in Mongolia, provided the Mongolian demerger reaches fruition."
Strike CEO Stuart Nicholls said,"This is an earnings accretive transaction for Strike that will simplify Strike’s operations and provide a platform to remove the costs in operating and managing its existing joint venture with Talon. The combined group will have the capacity to generate initial annualised cashflows in excess of A$82mn from the Walyering gas field alone. The additional free cashflow generation will support an acceleration of Strike’s government endorsed Perth basin development strategy”.
As part of the transaction, the companies have entered into a binding facility agreement pursuant to which Strike has agreed to provide a A$6mn convertible financing facility to assist Talon fund its short-term working capital needs.