Talisman project map

Talisman project map (Image: Talisman)

This morning, Spanish energy firm Repsol agreed to buy Talisman Energy (TLM.T) in a $8.3 billion dollar deal ($8 USD per share -$9.33 C$). The deal is expected to close in the 2nd quarter of 2015.

Investors have been speculating over a Repsol Talisman takeover or partial asset purchase for several months. With the recent near 50% drop in oil prices, and also in Talisman's share price, Repsol decided to pull the trigger and make an offer for the entire company.

The take-over will likely not please billionaire investor and famed corporate raider Carl Icahn, who took to Twitter on October 7, 2013 announcing a stake in Talisman. Assuming the Repsol deal closes, Icahn will be taking a rare loss on his investment.

According to insider filings, Icahn Associates Corp owned 76.06 million shares (7.35%) of Talisman stock as of the end of September 2014. Assuming his position remained unchanged over the fall, it appears Icahn will take a loss of roughly $325 million as his average cost per share is roughly $11.76 (USD).

Transaction details

  • The deal is a cash offer of $8.3 million and Repsol will also assume about $5 billion in debt bringing the total consideration to ~$13 billion.
  • Talisman will still pay out an 18 cent dividend on December 31st before the deal closes in 2015.

Repsol was in a strong financial position after reaching a $5 billion dollar settlement with the government in Argentina over the nationalization of assets earlier this year.

Repsol is expected to use its financial flexibility to maximize the value of Talisman's large undeveloped resource base.

The combined company will increase Repsol's output by 76 per cent to 680,000 barrels of oil equivalent per day, and boost reserves by 55 per cent.  Repsol will now become one of the top 15 largest privately owned oil and gas companies in the world.

Antonio Brufau, chairman of Repsol, said: "Our combination with Talisman allows us to align our highly complementary portfolios of upstream assets to create a truly global company well positioned to grow production and reserves. Talisman has strong operational capability, a highly skilled work force, and we look forward to leveraging their expertise as we partner to create a stronger, more profitable and competitive organization."

talisman1yrchart

The purchase price is above the 50 day moving average of $6.54 per share and is close to the 200 day moving average of $9.88 per share.

This is a fair deal given the current oil price but Talisman shareholders will be left wanting more after seeing the stock trade above $11 for most of the year and as high as $24.82 in 2011.

Will we see more deals in the energy space with share prices at the lowest levels in years?

Time will tell but companies in strong financial positions might be finding this an opportune time to make accretive acquisitors.

Symbol: TLM.T
Share price: $8.78
Shares outstanding: 1.04  B
Market cap:  $9.1 B

Read: Repsol to Acquire Talisman Energy for US$8.00 Per Common Share In All-Cash Transaction

I have no position in any of the stocks mentioned. This is not investment advice. As always please do your own due diligence.