Ithaca Energy Inc. offered to buy Valiant Petroleum Plc for 203 million pounds ($308 million) in cash and shares to double the North Sea oil explorer’s production.
Valiant owners will receive 307 pence in cash and 1.33 shares in Calgary-based Ithaca for each Valiant share, the companies said in a statement in London today. The total represents a 37 percent premium to Woking, U.K.-based Valiant’s 142 million-pound market value yesterday.
The deal marks a consolidation of North Sea explorers as they focus on expanding the search for oil and extending the life of fields after Exxon Mobil Corp. and BP Plc sold assets in the region. The deal will create an operator with 74 million barrels of reserves and will more than double Ithaca’s current production to 27,000 barrels of oil equivalent a day.
“The combined assets of the two groups have a strong strategic fit, with the acquisition materially increasing and broadening Ithaca’s producing asset base and reserves portfolio,” said Jack Lee, Ithaca’s non-executive chairman, in the statement.
Ithaca fell 8.8 percent to 117 pence in London. Valiant surged 31 percent to 455 pence.
The cash portion of the acquisition will be funded with a loan provided by Bank of America Corp., BNP Paribas SA and Bank of Nova Scotia, as well as existing cash, Ithaca said.
Valiant said in September it was reviewing whether to sell or break up the company to boost returns for shareholders. Ithaca itself broke off talks with potential buyers in May.
The boards of both companies recommend the merger. While Ithaca shareholders don’t need to vote on the deal, the board said it has received letters of support from owners.
Morgan Stanley is a financial adviser to Valiant on the deal.