Repsol Agrees to Buy Canada’s Talisman for $8.3 Billion

By Rodrigo Orihuela

Repsol SA (REP), Spain’s largest energy company, agreed to buy Talisman Energy Inc. (TLM) for $8.3 billion, ending a months-long search for acquisitions to help boost crude reserves and production.
Talisman shareholders will receive $8, or C$9.33, in cash for each share they own, according to statements from both companies. That’s a 60 percent premium to Talisman’s 30-day weighted average price, the Canadian company said.
Repsol has been seeking to spend about $10 billion on takeovers since receiving compensation in May from Argentina for the 2012 nationalization of YPF SA. The total deal value is about $13 billion, including Talisman debt, making it the biggest foreign takeover by a Spanish company since 2007, according to data compiled by Bloomberg. Repsol’s offer comes as a slump in crude drove the
Canadian explorer’s stock below C$5 for the first time in 14 years.
“They’re paying a full and fair price that Talisman shareholders should be satisfied with,” Brendan Warn, an analyst at BMO Capital Markets in London, said by phone. “If oil had stayed above $100, the deal may not have happened as Talisman would have ploughed on.”
Repsol fell for a seventh day, dropping 1.7 percent to 15.43 euros at 11:39 a.m. in Madrid. Talisman shares yesterday climbed 18 percent to C$5.97, after gaining 17 percent on Dec. 12. The stock is still down 44 percent since July 22, when news of Repsol’s interest in the company first surfaced, as oil prices plunged to the lowest in more than five years.

Photographer: David Ramos/Bloomberg

A customer refuels his vehicle at a Repsol SA gas station in Puigdalbert, near... Read More

Boosting Reserves

In losing the Argentine producer YPF, Repsol gave up almost half of its oil and gas reserves and has been looking for ways to replace them. The deal will boost Repsol’s crude reserves by 55 percent and production by 76 percent, the Madrid-based company said in a regulatory filing. Talisman’s main assets are in the U.S. and Canada.
“The transaction with Talisman is the result of a thorough analysis of more than 100 companies and assets around the world,” Repsol Chief Executive Officer Josu Jon Imaz said in a statement. “Talisman has always been the best option due to the excellent quality of its assets.”
Similar-sized targets in oil exploration have commanded an average premium of about 38 percent in the last three years, according to data compiled by Bloomberg.

Financing Deal

Repsol dropped its original interest in Calgary-based Talisman after carrying out due diligence, people familiar with the matter said at the time.
Repsol may sell as much as 5 billion euros ($6.26 billion) of hybrid bonds to help finance the transaction.
The deal requires the approval of Talisman shareholders, who include billionaire Carl Icahn. Icahn’s representatives on Talisman’s board support the offer, Repsol Chairman Antonio Brufau told reporters in Madrid today.
Canada Pension Plan Investment Board was weighing a bid for Talisman, people with knowledge of the matter said yesterday, after initially considering buying parts of the company.
Goldman Sachs Group Inc. and Nomura Holdings Inc. advised Talisman, while JPMorgan Chase & Co. advised Repsol.
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