- 49% premium to undisturbed share price
- Directors unanimously recommend offer
- i3 shareholders to receive cash dividend
Canadian oil and gas producer i3 Energy’s (I3E:AIM) shares surged 25% higher to 12p on Tuesday morning after the board recommended a £174 million takeover by Toronto-listed Gran Tierra Energy (GTE:TSE) following a period of poor share price performance.
While the offer represents a decent premium for i3 Energy shareholders based on recent prices, and shareholders will own up to 16.5% of Gran Tierra following completion, the takeout price is materially below the 31.2p at which i3 Energy traded two years ago and the 120p level reached back in 2018.
TERMS OF THE TIE-UP
Based on Gran Tierra’s $8.66 closing price on 16 August 2024, the deal values i3 Energy at £174.1 million or 13.92p per share.
That represents a 49% premium to i3 Energy’s closing price on the same date and shareholders will also receive a cash dividend of 0.2565p for the three months ending 30 September 2024.
For the uninitiated, i3 Energy is a UK and Canada listed oil and gas minnow with a significant producing asset position onshore Canada in Alberta which generates material cash flows, and also boasts appraisal assets in the North Sea with ‘significant upside’, according to management.
i3 Energy’s directors have unanimously recommended the offer, one Gran Tierra considers fair and will not raise unless another party throws its hat into the ring.
For the past five years, Gran Tierra has been looking to diversify into specific oil and gas basins where it is confident it can create shareholder value ‘focused on operated, high-quality assets with large resources in place and access to infrastructure’.
The Western Canadian Sedimentary Basin (WCSB) where i3 Energy’s key assets are based was one of those basins on its hit list.
i3 Energy’s Canadian assets are expected to contribute 18,000 to 19,000 barrels of oil equivalent per day (BOEPD) in 2024, complementing Gran Tierra’s guidance of 32,000 to 35,000 barrels of oil per day.
WHAT DID THE CEO SAY?
Majid Shafiq, CEO of i3 Energy, insisted the takeover by Gran Tierra presents an ‘exceptional opportunity’ for shareholders.
‘The acquisition represents the culmination of a thorough process to realise the maximum value available for shareholders and offers significant upside potential; it expedites the realisation of fair value, with a cash premium and incremental upside through continued ownership in the combined group, without necessitating additional capital investment, time, or operational risk,’ he explained.
‘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.’
