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Strike and Talon finally make a deal

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Photo by Reuters

14th August 2023

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – ASX-listed Strike Energy has made good on its ambitions to acquire fellow-listed Talon Energy, entering into a binding scheme implementation deed with the takeover target after twice missing the mark.

Strike in July twice made and abandoned tentative bids for Talon Energy, first offering Talon shareholders 0.4586 Strike shares for every Talon share held, and then 0.4828 Strike shares for every Talon share held.

Both of the initial transactions had been structured around the proposed demerger of Talon’s Mongolian assets to its existing shareholders.

Strike on Monday confirmed the scheme implementation deed, under which Talon shareholders will receive 0.4828 new Strike shares for every Talon share held. In parallel with the scheme, Talon will look to demerge its Mongolian assets to the benefit of its shareholders to potentially deliver significant value.

The offer implies a price of 21.2c a share for Talon’s Perth Basin business, which is a near 21% premium to the company’s closing price on August 11.

The offer has been unanimously endorsed by the Talon board.

“Talon is pleased to be entering into this scheme process with Strike Energy. Upon successful implementation of the scheme Talon shareholders will benefit from receiving an attractive premium for their shares and may also realise additional value from continued exposure to the Gurvantes development in Mongolia should the Mongolia demerger complete,” said Talon MD and CEO Colby Hauser.

“Talon shareholders will benefit from becoming shareholders in the combined Strike Energy, which is expected to have a strong cashflow profile with a number of medium-term growth and development projects.”

Strike told shareholders that the acquisition of Talon was compelling, given the potential for strategic and financial benefits, with the combined company to have the capacity to generate an initial annual cashflow of A$82-million from the Walyering gasfield alone.

Strike will also be able to remove significant cost through corporate and operational synergies through collapsing the current joint venture with Talon, with the company’s balance sheet to be further improved with an increased ability to access debt markets and self-fund development projects along with the combined exploration portfolio.

The combined company will have 1 022 PJ of independently certified Perth basin conventional gas 2P reserves and 2C resources.

“This is an earnings accretive transaction for Strike that will simplify Strike’s operations and provide a platform to remove the costs in operating and managing its existing joint venture with Talon,” said Strike MD and CEO Stuart Nicholls.

“The combined group will have the capacity to generate initial annualised cashflows in excess of A$82-million from the Walyering gasfield alone. The additional free cashflow generation will support an acceleration of Strike’s government-endorsed Perth basin development strategy.”

As part of the transaction, the two companies have entered into a binding facility agreement under which Strike will provide a $6-million convertible finance facility to assist Talon in funding its short-term working capital requirements.

The transaction is subject to a number of conditions, including shareholder and court approval, as well as an independent expert concluding that the offer is in the best interest of Talon shareholders.

The demerger of the Mongolian assets is also subject to shareholder approval at a separate general meeting of Talon shareholders, however, the scheme is not conditional on the completion of the Mongolian demerger.

Edited by Creamer Media Reporter

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