88 Energy (ASX: 88E) is making an unsolicited off-market, all paper takeover offer for XCD Energy (ASX: XCD) arguing it will make for a financially stronger Alaska explorer with greater exposure to global investors.
Both companies have ground on the oil-rich North Slope of Alaska, which has already produced 16 billion barrels of oil and holds an expected 28 billion barrels remaining resource.
The offer was delivered late on Friday afternoon and since then, discussions have continued between the two companies.
In the meantime, XCD has advised shareholders to take no action.
88 Energy is offering 1.67 of its new shares for one XCD Energy share, and 0.5 new 88 Energy shares for one XCD quoted option.
The offer is subject to several conditions: a 90% minimum acceptance level, no material adverse changes, absence of third party rights, no regulatory action or interference, no material acquisitions or disposals, and no prescribed occurrences.
Takeover would create diversified exploration portfolio
XCD Energy is active in the North Slope region with 100% ownership of 195,373 acres (790sq km).
It has a prospective resource of about 1.6 billion barrels. The company also added four additional leases in the December quarter.
88 Energy controls a net 250,000 acres (1,011sq km). Its major project is called Icewine and the company was recently free-carried through a conventional well named Charlie-1 by London-listed Premier Oil for up to US$23 million (A$35.7 million). Premier, which has operations in Indonesia, Mexico and offshore Falkland Islands, subsequently withdrew from the project.
In its announcement of the takeover, 88 Energy said a combined company will have an attractive and complementary portfolio of exploration assets.
Its case also notes that a larger entity will have enhanced strategic, commercial, technical and financial strength to optimise financing of operations and exposure to a larger global investor base.
Pre-acceptance deals with some shareholders
88 Energy said it has entered into pre-bid acceptance deeds with major XCD Energy shareholders and listed option holders in respect of 18.5% of XCD shares and 6.8% of listed options on issue.
However, XCD’s board advised its shareholders to take no action and await the board’s formal response to the offer including the directors’ recommendation.
“The XCD board has not had the opportunity to fully consider the offer and the details of its terms and conditions, so makes no comment or recommendation on the same,” it stated.
The offer values XCD shares at $0.01 each, representing a 100% premium to Friday’s closing price of $0.005. In early Monday trade, XCD shares initially rose 60% to $0.08. 88E shares were unchanged.