88 Energy Limited (LON:88E) (ASX:88E) has launched an all-paper takeover bid for XCD Energy, with a view to creating a consolidated Alaska-focused exploration company.
XCD holds some 195,373 acres on the North Slope in Project Peregrine which would add to 88 Energy’s 480,000 acres which span across the Project Icewine and Yukon licences. The XCD assets are described as “attractive and complimentary”.
88 Energy’s unsolicited bid is worth A$7.5mln - the offer is 1.67 new 88 Energy shares per XCD share, plus 0.5 88 Energy shares per XCD listed option - and it already has the backing of major XCD shareholders accounting for 18.5% of the equity and 6.8% of the options.
With an implied price of 1 Australian cent per share - based on a 10 day VWAP for 88 Energy’s shares - the offer is presented as offering XCD shareholders a 100% premium.
88 Energy said that constructive talks took place over the weekend with XCD’s management, though a “short timeframe prevented execution of a bid implementation deed.”
It is intended that further talks will continue with the aim of securing an agreement and recommendation of the bid.
"In a combined company, XCD Energy shareholders and listed option holders will be able to leverage from 88 Energy's geological and operational expertise, specific to the North Slope of Alaska, where we have drilled four wells as Operator and acquired several 2D and 3D seismic surveys over the last five years,” Dave Wall, 88 Energy managing director said in a statement.
“This includes extensive technical knowledge of the regionally successful Brookian oil plays, in which 88 Energy retains significant upside exposure via its highly prospective portfolio of exploration/appraisal projects covering ~250,000 net acres (480,000 gross) co-located on the North Slope."
In its own statement, XCD noted that the takeover approach would be subject to a number of conditions, including a 90% minimum acceptance condition.
XCD told its shareholders to “take no action” whilst its board makes a formal response to the offer.
“The XCD Energy board is currently giving careful consideration to the detail of the offer including the conditions. 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,” XCD added.