Spain's Repsol SA has ended a 15-month search for an acquisition to replace lost Argentine assets with an agreed bid for Canada's Talisman Energy Inc. that values the target at $12.9 billion including debt.
Repsol will offer C$9.33 ($8) per share for Calgary-based Talisman, valuing the business's equity at $8.3 billion and equating to a 56% premium to its closing price of C$5.97 on Monday.
The deal fills a hole in Repsol's upstream production left by Argentina's nationalization of the Spanish company's 51% stake in YPF SA in May 2012. It also puts to work $9 billion of cash at hand, about $6.3 billion of which was received from Argentina in compensation for the seizure of YPF.
Buying Talisman will "increase [Repsol's] output 76% to 680,000 barrels of oil equivalent per day and will boost reserves 44% to more than 2.3 billion barrels of oil equivalent," Repsol said on Tuesday.
The purchase will also rebalance Repsol's activities toward politically stable oil producing jurisdictions. North America will become Repsol's No. 1 region, accounting for about 50% of its upstream capital expenditure, up from 30%, while the riskier Latin America will fall to 22% of capex, from 50%.
"From an industrial-logic viewpoint it probably makes sense in the long run, but you have to ask the question why do the deal now and why in such a friendly manner?" said Banco Santander SA analyst Jason Kenney. "They could have waited until Talisman was really on its knees or gone hostile and probably got it for C$3 or C$4 cheaper."