i3 Energy looks set to be one of the latest companies to leave London’s markets after agreeing on a takeover deal with Gran Tierra Energy Inc.
Gran Tierra Energy has agreed to acquire i3 Energy plc in a cash and share offer valued at approximately £174.1 million ($225.4 million). The deal will see i3 Energy shareholders receive one new Gran Tierra share for every 207 i3 Energy shares held, plus 10.43p cash per share.
i3 Energy shareholders will also receive a cash dividend of 0.256p per share. This acquisition dividend replaces the ordinary dividend for the quarter ending September 30, 2024. Upon completion, i3 Energy shareholders will own up to 16.5% of Gran Tierra.
The offer represents a fairly healthy premium for i3 Energy shareholders based on very recent prices, but the price is still a long way below where the stock has been in recent years. Based on Gran Tierra’s closing price on August 16, 2024, the deal values i3 Energy at 13.92p per share – a 49% premium to its closing price on the same date.
i3 Energy shares were trading as high as 32p in 2022. The deal is clearly another example of overseas players seeing greater value in the operations of London-listed companies than the valuation the UK’s equity investors are willing or able to give them. Unfortunately, i3 Energy will not be the last UK-listed company to be taken over at knockdown prices while London’s market struggles to value quality companies properly.
To provide flexibility for shareholder in this deal, a Mix and Match Facility will allow shareholders to adjust the proportion of cash and shares they receive, subject to offsetting elections and certain limitations.
Gran Tierra’s strategic move aims to diversify its portfolio and create a larger, more diversified energy company in the Americas. 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.