The Deal: Cepsa Woos Coastal With $2.2B Offer
NEW YORK ( The Deal ) -- Cia. Espanola de Petroleos SA , a Spanish oil company owned by Abu Dhabi, said on Tuesday, Nov. 19, it had made an agreed C$2.3 billion ($2.2 billion) bid for Coastal Energy Co. (CEO.L) to expand exploration and production in Asia.
Espanola de Petroleos, known as Cepsa, said it will offer C$19 a share for Houston-headquartered Coastal, a 28% premium to the target's closing price on Monday. The offer values Coastal's equity at C$2.249 billion and includes a further C$51 million of net debt.
"Coastal's business comprises a high-quality portfolio of upstream assets located in Southeast Asia," Cepsa said. "We believe that Coastal provides a tremendous foundation for furthering our E&P strategy."
Cepsa will bid through a new holding company that will be minority owned by Strategic Resources (Global) Ltd., the private investment vehicle of Larry Low.
Cepsa's bid follows a roughly 30% decline in Coastal's share price over the past year, including a 10% fall earlier this month, after a series of results revealed lower- than-expected output.
London- and Toronto-listed Coastal owns and operates two offshore blocks in Thailand and has a 13.7% stake in Thailand's onshore Phu Horm gas field. It also has contracts with Petroliam Nasional Bhd to develop and produce oil in a cluster of offshore fields around the Malaysian Peninsula.
The target said in June that it had proven and probable reserves of about 144 million barrels of oil equivalent and claims to have identified more than 30 prospective drilling sites that could contain a further 477 million barrels of oil equivalent.
In a presentation at its June general meeting, Coastal said its shares were worth $23.67 based on net asset value, a 24% premium to Tuesday's offer. That valuation gap didn't stop Coastal's board throwing its support behind Cepsa's offer.
"This transaction delivers significant and immediate value to our shareholders," Coastal CEO Randy Bartley said in a statement. "This transaction is in the best interest of Coastal Energy Company ."
For Cepsa, a successful deal will marks its first major expansion since Abu Dhabi's International Petroleum Investment Co. took control of the business in early 2011. The Gulf state sovereign wealth fund increased its stake in Cepsa to 95.9%, when it paid 3.7 billion euros for a 48.8% stake owned by France's Total SA .
Tim Saxman and Credit Suisse Group. Cepsa tapped a Goldman Sachs Group Inc. team including Suhail Sikhtian , Hazem Shawki and Brian Haufrect , and PricewaterhouseCoopers LLP for advice, with the latter also acting for Strategic Resources.
Coastal's London-listed shares traded Tuesday morning at 1,104 pence up 199 pence, or 22%, on their Monday close. That equates to a market capitalization of 1.25 billion pounds ($2.01 billion). Coastal's Toronto-listed shares closed Monday at C$14.81.