CALGARY - A $923-million takeover offer for First Calgary Petroleums (TSX:FCP) from Italian energy firm Eni SPA has the support of at least one major shareholder - unless a better deal comes along.
Eni, a long-time player in North Africa, has offered $3.60 in cash for First Calgary, which is in the midst of developing a huge natural gas field in Algeria.
The offer for the Calgary-based company represents a 59.2 per cent premium to the 30-day weighted average trading price of its stock and is supported by the First Calgary board - which has been under pressure to find a buyer for the company.
The transaction is backed by shareholders holding about' per cent of First Calgary stock, including U.K.-based Waterford Finance & Investment Ltd., which led a revolt that resulted in chief executive Richard Anderson's resignation in April.
Waterford director Michael Kroupeev said Monday his firm has believed for some time that a sale of First Calgary would be good for shareholders.
In the absence of any other firm bids, the Eni offer seems fair, he said in an interview from Moscow.
However, there is a strong possibility another major player might step in with a richer offer, Kroupeev said.
The Algerian natural gas field is "quite interesting" to not only Europeans, but American, Russian and Chinese companies as well, he said.
"The other angle is that (Algerian state-owned oil company) Sonatrach is full of cash and if they believe that it's good value, they might buy as well."
First Calgary had been working with Sonatrach to develop a massive natural gas field in Algeria's Berkine Basin, about 2,000 kilometres south of the Mediterranean coast.
First Calgary president and CEO Shane O'Leary, who was chief operating officer before replacing Anderson, said his company is "pleased to support the transaction, which we believe delivers the highest value for FCP shareholders compared with other strategic options.
"We will work with Eni to ensure a smooth transition and avoid disruptions to the project. We believe the resources and expertise that Eni can bring to this project should accelerate the development."
North Africa is a key part of Eni's portfolio. It entered Libya in'59 and first became involved in neighbouring Algeria in'81.
The First Calgary acquisition will increase Eni's reserves by about'0 million oil-equivalent barrels per day within in its Algerian asset portfolio, the Italian company said in a statement on its website Monday.
"The transaction is in line with our strategy of increasing our presence in our core countries, acquiring high potential assets. We will utilize our well-established expertise and experience in Algeria to leverage operational synergies," stated Eni CEO Paolo Scaroni.
"We are committed to the successful and rapid development of these gas fields and the consequent rapid start up of an important resource for the country."
Production is expected to begin in 2011, ramping up to about 30,000 oil-equivalent barrels per day the following year, Eni said.
First Calgary underwent an unsuccessful sales process in 2004, after which its stock plummeted from around $20 to as low as $2.
But now the timing is much better, said Tristone Capital analyst Toby Pierce.
"I think they were just a little premature in developing up their asset base and they tried to sell a little bit too early without the information they needed," he said in an interview.
"Now they essentially have all the information they need. They've learned how you deal with the Algerian government. In the end things will work out in a much better fashion."
While there may be some investors out there who would have wanted to see First Calgary sold for a higher price, the Eni acquisition is fair in light of how much money it will need to put into the Algerian asset, Pierce said.
Regulators halted shares in First Calgary Wednesday after an unusual spike on the Toronto Stock Exchange, spurring speculation that a major transaction could be in the works.
Later Wednesday, First Calgary confirmed that it was in talks with third parties about a possible sale of the whole company or a major asset.
Monday afternoon, First Calgary shares traded at $3.46, down nine cents or 2.5 per cent from Friday's close but up from $2.36 at the close of trading on Sept. 2, before the lates takeover rumours began drive up the stock.
PREVIOUS
