20th Aug 2024 12:28
(Alliance News) - Gran Tierra Energy Inc's acquisition of i3 Energy PLC is expected to bring "multiple benefits", an analyst on Tuesday said.
Gran Tierra has agreed to buy i3 Energy, a Westhill, Scotland-based oil and gas company with assets in the UK and Canada, in a cash and shares deal with an implied equity value of GBP174.1 million for i3 Energy.
Gran Tierra is an oil and gas exploration and production company focused on the acquisition and development of energy assets in South America.
"The acquisition will create a more diverse international energy company operating across the Americas in regions with substantial oil and gas production, well-established regulatory regimes, stable contracts, access to markets and attractive fiscal terms. The combined group will offer a more diversified proposition to both i3 Energy shareholders and Gran Tierra shareholders," Gran Tierra said.
Under the terms of the acquisition, each i3 Energy shareholder will be entitled to receive one New Gran Tierra share per every 207 i3 Energy shares held, plus 10.43 pence cash per i3 Energy share.
In addition, each i3 Energy shareholder will be entitled to receive a cash dividend of 0.2565 pence per i3 Energy Share in lieu of the ordinary dividend in respect of the three month period ending September 30.
The acquisition implies a value of 13.92 pence per i3 Energy share and around GBP174.1 million for the total share capital of i3, whose shares had closed at 9.63p each on Monday, giving it a market capitalisation of GBP115.8 million.
i3 Energy shares jumped 27% to 12.24p each on Tuesday in London, giving it a market capitalisation of GBP147.3 million.
Gran Tierra shares were up 0.2% at 696.50p each on Tuesday in London. In after hours trading in New York on Monday, Gran Tierra shares had rise 5.3% to USD8.98 each.
Gran Tierra said it expects takeover of i3 Energy to become effective in the final quarter of the year.
Gran Tierra said i3 Energy directors consider terms of acquisition "fair and reasonable."
i3 Chief Executive Officer Majid Shafiq said: "We believe that the acquisition presents an exceptional opportunity for i3 Energy's shareholders", and offers "significant upside potential".
"This business combination will significantly enhance scale, thereby improving capacity to drive growth, production, and cash flows for the benefit of all shareholders and local stakeholders."
Peel Hunt noted i3’s assets are located in the Western Canadian sedimentary basin, an area proximate to Gran Tierra’s existing head office and where the management team has previous operating experience.
The broker pointed out Gran Tierra expects the deal to introduce new mid-point 2024 production guidance of 18.5 million barrels of oil equivalent per day and proven and probable reserves of 175m boe/d, thereby materially increasing the scale of the business and taking pro-forma production of the combined group to around 50m boe/d.
Peel Hunt said it anticipated Gran Tierra would be active in the mergers and acquisitions market for some time. "
"On first pass, we expect this transaction to bring multiple benefits, including increased scale and relevance for the enlarged business on both the TSX and LSE, as well as a strengthened and more diversified asset base capable of delivering long-term production, cash flows, and shareholder value."
Peel Hunt has a 'buy' rating on Gran Tierra.
Analysts at S&P Angel Energy noted Gran Tierra has been looking to diversify its Colombia-focused production portfolio in the last few years in order to increase in scale, which is expected to facilitate access to capital, allow for optimised capital allocation, enhance shareholder returns and increase relevance to investors.
By Jeremy Cutler, Alliance News reporter
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