Repsol is exploring a bid for Talisman after identifying it as a top target, people with knowledge of the matter said yesterday. It is working with JPMorgan Chase & Co. as it evaluates a possible deal, one of the people said, asking not to be identified discussing private matter.
Talisman, which issued a statement after its shares rose in Toronto trading today, said “there is no assurance that any transaction will be agreed,” without providing other details. Repsol issued a similar statement in a regulatory filing.
Based in Calgary, Talisman had a market value of about $11.6 billion after its shares rose 13 percent today. The company’s U.S. and North Sea assets - in particular an opportunity to gain a foothold in the oil-rich Eagle Ford basin in Texas - are likely the most appealing to Repsol, Canacord Genuity analyst Richard Griffith wrote in an note today.
Repsol Chief Financial Officer Miguel Martinez said in May that the company, which is valued at about $34 billion, is looking for targets that offer a “growth platform” and are based in more stable countries than most of its current overseas operations. Its biggest purchase so far, the more than $15 billion acquisition of Argentina’s YPF SA (YPF) in 1999, ended with the Argentine government’s seizure of a 51 percent stake in the company in 2012.
Talisman jumped 13.25 percent to C$11.97 in Toronto trading. Repsol fell about 1.1 percent to 18.42 euros in Madrid.
“There might be assets in the Talisman portfolio that could be of interest -- but a full company bid would be a surprising move,” Jason Kenney, an equity analyst at Banco Santander SA, said by e-mail ahead of Talisman’s statement.
In May this year Repsol received and then sold about $5 billion of bonds from Argentina in compensation for the nationalization of the stake. In the same month the company made a further $1.3 billion from the sale of the 12 percent it still held in the Argentine gas and oil producer.
The $6.3 billion from YPF adds to the roughly $7.1 billion that Repsol held in cash and equivalents at the end of the first quarter. Repsol has said it may spend as much as $10 billion on deals, and any acquisition would probably be in the U.S., Canada or other developed markets, such as northern Europe.
Repsol previously considered an acquisition of Pacific Rubiales Energy Corp., Latin America’s largest non-state-owned oil producer, though it decided for the time being not to pursue a deal, people familiar with the matter said in March.
Talisman generates about half it sales from North America and the North Sea, with the rest mostly coming from Southeast Asia, data compiled by Bloomberg show. Talisman Chief Executive Officer Hal Kvisle in May blamed weakness of the North Sea business for weighing on the company’s turnaround.
Talisman said in March it plans to divest $2 billion in assets over 18 months and in June said it hired Miro Advisors Pty to sell its stake in oilfields off northern Australia. Talisman and Statoil ASA ended their effort to sell a joint venture in Texas’s Eagle Ford shale after offers came in lower than expected, people familiar with the matter said this month.
The company, which was targeted by billionaire investor Carl Icahn, has underperformed Canadian and global energy peers as it seeks to unwind a portfolio of investments spanning six continents amassed mostly last decade. Kvisle, a director of Talisman, replaced John Manzoni as CEO in 2012 and pledged to boost profits by refocusing the company.
Talisman’s board is seeking to replace Kvisle, who said he plans to step down by the end of the year.
To contact the reporters on this story: Manuel Baigorri in London at firstname.lastname@example.org; Cotten Timberlake in Washington at email@example.com; Rodrigo Orihuela in Madrid at firstname.lastname@example.org