July 20 (Bloomberg) -- Addax Petroleum Corp., the Swiss oil company that sold shares to the public in February, agreed to buy Pan-Ocean Energy Corp. for C$1.61 billion ($1.41 billion) to expand output in Africa.

The cash purchase also includes assumption of an estimated C$30 million in debt, Geneva-based Addax said today in a statement. Pan-Ocean, based on the English Channel island of Jersey, said the deal is worth about C$58.50 per Class B share and C$65.80 per Class A share. The Class B shares, which are more actively traded, closed yesterday at C$53.20.

Addax focuses on producing light oil in West Africa, and Pan-Ocean's output of such crude in Gabon is forecast to rise rapidly in the next year. Addax said the acquisition will complement its existing operations in the region and includes untapped properties with potential for reserves growth.

``This allows Addax to grow within an area of their core focus in a material scale at a good price,'' said Jason Squires, an analyst at Wellington West Capital Markets in Toronto. ``They got it for less than four times cash flow, so it's a very good price.''

Addax or another bidder probably would have to pay more if they waited a few months and Pan-Ocean was successful with new wells, said Squires, who rates Pan-Ocean's shares at buy and doesn't own any.

Class B shares of Pan-Ocean jumped C$4.79, or 9 percent, to C$57.99 in Toronto Stock Exchange trading. Addax shares rose 15 cents to C$28.15.

Output Is Rising

Pan-Ocean on July 12 said it was in discussions that could lead to the sale of its production subsidiary.

Addax will use a combination of existing cash and debt to fund the purchase, company spokeswoman Marie-Gabrielle Cajoly said. The company, which employs almost 350 people, was formed in 1994.

Pan-Ocean last month said its production increased to 12,500 barrels of oil a day from 9,600 at the end of 2005, partly on development of the Tsiengui field in Gabon. The company, which employs about 200 people, owns almost 93 percent of Tsiengui, which was discovered in 2004.

Completion of a pipeline later this year should boost production from Pan-Ocean's assets in Gabon to 18,000 barrels a day, Addax said. Additional drilling could lift output to more than 30,000 barrels a day next year, Addax said. The purchase will boost per-share output, reserves and cash.

Acquisition Bids

``We believe that this transaction provides excellent value for the shareholders of Addax Petroleum, both today and in the future,'' Chief Executive Officer Jean Claude Gandur told investors on a conference call.

Addax's first-quarter production averaged about 80,000 barrels a day. The acquisition will add proved and probable reserves equivalent to 67.5 million barrels of oil, Addax said.

Pan-Ocean hired financial advisers in February because the company's share price didn't reflect its asset value, Chief Financial Officer Robert Wynne said today in telephone interview. A number of companies submitted bids, he said, declining to elaborate.

Addax submitted a bid this month and conducted one-on-one negotiations for about the past two weeks, Gandur said.

Addax, which has the right to match competing bids, said it will receive C$45 million if another company purchases Pan- Ocean.

Management and directors of Pan-Ocean agreed to support the transaction. They control 99.6 percent of the Class A shares and 1.8 percent of the Class B shares, Addax said.

RBC Markets and NM Rothschild & Sons Ltd. advised Pan-Ocean on the sale. Addax said it was advised by a unit of Canada's Bank of Nova Scotia.

To contact the reporter on this story: Ian McKinnon in Calgary at Imckinnon1@bloomberg.net.

Last Updated: July 20, 2006 16:13 EDT