Canadian oil and gas explorer Sintana Energy is acquiring AIM-listed Challenger Energy Group in an all-share transaction worth approximately £45 million.
Under the terms of the takeover, Challenger shareholders will receive 0.4705 new Sintana shares for each Challenger share they hold. That values each Challenger share at 16.61 pence – an attractive 44% premium to the closing price of 11.50p on 8 October and a 97% uplift on Challenger’s three-month volume-weighted average price.
Once the deal completes, former Challenger shareholders will own roughly 25% of the combined group. They’ll receive about 126.7 million new Sintana shares in total.
The deal has backing from major shareholders. Investors holding 34.2% of Challenger’s issued share capital – including independent directors – will vote in favour.
Although recent buyers of Challenger Energy shares will be pleased with the deal, there is an argument that the firm could be worth a lot more in the future, given the strength of its assets.
Challenger’s crown jewels are two offshore blocks in Uruguay, which are estimated to hold up to 980 million barrels of recoverable oil.
The company holds a 40% working interest in AREA OFF-1, where oil major Chevron operates with a 60% stake. In AREA OFF-3, Challenger is both operator and 100% owner.
It was the only junior explorer with significant offshore acreage in Uruguay, which is dominated by the world’s largest oil firms.
The all-share nature of the transaction means Challenger shareholders will still have exposure to any further upside, if they continue to hold Sintana shares.