Ophir Energy (LSE: OPHR) — an upstream oil and gas exploration company — this morning announced that agreement has been reached for the acquisition of the South East Asia-focused independent exploration and production company Salamander Energy (LSE: SMDR).
Ophir’s share price is currently down just over 1%, to 168p.
The boards of the two companies say there is “compelling strategic logic” for the two businesses to combine that will “substantially benefit” both sets of shareholders. The enlarged Ophir will, the company says, be able to exploit diversified funding sources, which will significantly enhance the long-term sustainability of the combined business.
Ophir also says that the purchase of Salamander will enhance its operating capability in both Africa and South East Asia, and that the combined company will gives its shareholders exposure to 21 production, development and exploration blocks in South East Asia, in addition to Ophir’s extensive activities in Africa.
Under the terms of the transaction, Salamander shareholders will get 0.5719 new Ophir shares for each Salamander share they hold, and they will own approximately 20.9% of Ophir. That represents an indicative value of 115.9p for each share in Salamander — a 44.5% premium on its closing share price on 24 October, which was the last business day before the offer period started.
Commenting on the acquisition, Ophir’s non-executive chairman, Nicholas Smith, said:
“Combining Ophir and Salamander will create a balanced African and South East Asian operating platform, designed to deliver Ophir’s exploration-led strategy across both regions. We see many value creating opportunities in both Africa and South East Asia that can be swiftly accessed by leveraging Ophir’s exploration expertise with Salamander’s operational strength. Furthermore, Salamander’s anticipated growing production will allow Ophir to diversify its funding sources, and to continue to monetise assets for the benefit of shareholders.“
Ophir’s shareholders will certainly be hoping that the acquisition will benefit them — Ophir’s share price is down 52% on this time last year, compared with a 1.3% gain by the FTSE 250 index. And the longer-term story is much the same, with Ophir having fallen 33% over the past five years, whilst the FTSE 250 has risen 13%.
