GLENCORE Xstrata yesterday swooped for Chad-focused oil company Caracal Energy, offering $1.3bn (£780m) to beat off a rival bid from Canada’s TransGlobe Energy.
London-listed Caracal had agreed to a $1.08bn merger with the Canadian oil explorer last month, but the FTSE 100 miner trader trumped the deal with a £5.50 per share offer, representing a 61 per cent premium to Caracal’s closing share price on Friday. Glencore paid a $9.25m termination fee to TransGlobe under the terms of the previous deal.
City A.M. understands that Glencore will fund the Caracal deal with some of the proceeds from the sale of Peruvian copper mine Las Bambas for upwards of $6.25bn, a deal that was only announced on Sunday.
The company is stepping into familiar territory with yesterday’s acquisition, having partnered with Caracal to operate an oil field in Chad in 2012.
Ben Davis, analyst at Liberum, said he was surprised that Glencore had splashed out on an acquisition, rather than using the proceeds to bring down levels of debt.
Glencore is highly leveraged compared to its peers, recording net debt of $35.8bn at the end of 2013.
Goldman Sachs and RBC Capital Markets gave Caracal financial advice on the deal and Stikeman Elliott gave legal advice. Torys, McCarthy Tetrault and Clifford Chance acted as Glencore’s legal counsel.
Glencore shares rose two per cent.