Talon Energy Ltd (ASX:TPD) has been advised by Strike Energy that an acquisition offer of 0.4828 new Strike shares for each Talon share represents its “best and final offer” in the absence of a superior proposal.
The effect of this is that Strike Energy will not be able to increase the consideration payable to Talon shareholders unless there is a superior proposal for Talon.
READ: Talon Energy to be acquired by Strike Energy; to demerge Mongolian asset
On August 14, 2023, Strike announced that it intended to acquire Talon by way of a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth).
The intention of Strike is to gain as much benefit as possible from the jointly held assets in the Perth Basin of Western Australia and to accelerate Strike’s development strategy, which has been endorsed by the WA State Government.
Looking to spin out Gurvantes
In parallel, Talon has initiated exploratory discussions centred on spinning out its 33% interest in the Gurvantes XXXV CSG Project in Mongolia with the potential for its shareholders to retain an interest in those assets.
In a statement, Strike Energy said: “Strike continues to believe the acquisition of Talon is both strategically compelling and logical for both Strike and Talon shareholders.”
The reasons will be further detailed in a scheme booklet to be released by Talon in the coming weeks.
Strike said that this transaction was not critical for the implementation of its go-forward strategy.
Implementation deed
Talon previously established a secured convertible facility with Strike Energy pursuant to which Strike agreed to provide additional funding of up to $6 million to assist Talon fund its short-term working capital needs through the scheme process.
The effect of this is that if the scheme is not implemented, Strike will not exercise its rights to convert any outstanding loan amounts under the secured convertible facility into Talon shares and instead will require the repayment of amounts outstanding under the secured convertible facility.
Following termination of the scheme implementation deed, Talon has 60 days to repay any amounts owed under the secured convertible facility.
Talon's board considers that the 60-day period is sufficient to complete any refinancing or capital raising required to repay any amounts owing under the secured convertible facility.
The board said that Talon was in advanced negotiations for alternative sources of additional funding prior to reaching an agreement on the terms of the scheme implementation deed with Strike Energy.
A win-win
On announcing the Strike offer, Talon MD and CEO Colby Hauser said the company was pleased to be entering into this scheme process.
“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 Mongolian demerger complete.
“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.”