SYDNEY, AUSTRALIA: Strike Energy has announced a deal to acquire Talon Energy Limited (ASX: TPD, Talon), a Perth Basin-focused oil and gas company, in a share swap scheme of arrangement.
The deal will enhance Strike’s position as a leading gas producer and developer in the Perth Basin, where it operates the West Erregulla gas project.
Under the terms of the deal, Talon shareholders will receive 0.4828 new Strike shares for each Talon share held, implying an offer price of A$0.2122 per Talon share. This represents a 21% premium to Talon’s closing share price as at 11 August 2023, excluding any additional value that may be realised for Talon shareholders via the potential demerger of Talon’s Mongolian assets.
Talon’s board of directors has unanimously endorsed the deal and recommended that its shareholders vote in favour of the scheme, subject to an independent expert’s opinion and no superior proposal emerging. The deal is also subject to customary conditions, including regulatory approvals and court approval.
In parallel with the scheme, Talon will look to demerge its Mongolian asset, which holds a 33% interest in the highly prospective Block XX exploration licence, to the benefit of Talon shareholders. The demerger will allow Talon shareholders to retain exposure to the upside potential of the Mongolian asset, while also receiving Strike shares that offer immediate value and growth prospects in the Perth Basin.
The Mongolian asset will be spun out into a separate vehicle, which will receive A$850,000 cash from Talon (less any costs incurred in connection with the demerger and certain other costs and funding provided for the Mongolian assets by Talon during the scheme/demerger process). Talon shareholders will receive shares in the new vehicle on a pro rata basis.
Strike has agreed to provide Talon with a A$6 million interim convertible funding facility to fund Talon’s capital requirements through the scheme process. The facility will be convertible into Strike shares at the scheme exchange ratio upon implementation of the scheme.
The acquisition will generate material corporate and operational synergies for Strike, as it will consolidate its ownership of key Perth Basin assets, including the Walyering gas field, which is expected to generate an initial annualised revenue of more than $82 million. The deal will also increase Strike’s 2P reserves by 36% and its 2C contingent resources by 18%.
Strike’s managing director and CEO, Stuart Nicholls, said: “The acquisition of Talon is a logical and value accretive step for Strike as we look to accelerate the pace of development in our Perth Basin business. Talon’s assets are highly complementary to our existing portfolio and will provide us with additional production, cash flow and resource upside. We are pleased to welcome Talon shareholders to Strike and look forward to delivering on our shared vision of creating a leading domestic gas company.”
Talon’s managing director and CEO, David Casey, said: “We are delighted to announce this transaction with Strike, which we believe delivers an attractive outcome for our shareholders. The offer recognises the value of our Perth Basin assets, while also allowing our shareholders to participate in the potential demerger of our Mongolian asset. We believe that joining forces with Strike will create a stronger and more diversified company with significant growth opportunities in the Perth Basin and beyond.”