In a significant development, Talon Energy Ltd (ASX:TPD) has formalised a binding scheme implementation deed with Strike Energy Ltd (ASX:STX), a strategic move that will see Strike acquire all issued shares of Talon by the way of a scheme of arrangement.
On implementing the scheme of arrangement, Talon shareholders are set to receive 0.4828 new Strike shares for every Talon share held as of the record date.
On the culmination of this acquisition, Talon's shareholders will collectively represent an approximately 11% ownership stake in Strike Energy.
In parallel, Talon has also initiated exploratory discussions centred on spinning out its 33% interest in the Gurvantes XXXV Project in Mongolia.
Reinforcing the strength of this collaboration, Talon's Board of Directors has extended a unanimous recommendation in favour of the proposed scheme.
Attractive premium
Talon MD and CEO Colby Hauser said the company was 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 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.”
Agreement terms
The terms of the agreement value each Talon share at an implied offer price of A$0.212, taking into account Talon's significant assets in the Perth Basin.
This valuation benchmarks Strike Energy's closing price of $0.44 per share as of August 11, 2023.
The pricing strategy is indicative of a premium, highlighting a 29.3% increase over Talon's 30-day Volume Weighted Average Price (VWAP), a 26.1% rise over the 60-day VWAP, and a commendable 21.4% compared to the closing share price of Talon on August 11, 2023.
Next steps
Talon shareholders will be asked to approve the scheme at a meeting which is expected to be held in early December 2023.
A booklet containing information relating to the scheme, the reasons for the Talon directors’ recommendation, the Independent Expert’s Report and details of the scheme meeting will be dispatched to Talon shareholders in advance of the meeting.
Talon has appointed Sternship Advisers and RBC Capital as financial advisers and Allens as the legal adviser.
To enhance Perth Basin strategy
Strike MD & CEO Stuart Nicholls said: “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.
"The combined group will have the capacity to generate initial annualised cashflows in excess of A$82 million from the Walyering gas field alone.
"The additional free cash flow generation will support an acceleration of Strike’s government-endorsed Perth Basin development strategy.”