In a landmark move set to reshape the energy sector, Gran Tierra Energy, Inc., a prominent US-based oil and gas exploration and production company, has confirmed the acquisition of UK-based i3 Energy plc for approximately £174.1 million (US$225.4 million). The acquisition will be executed through a scheme of arrangement under Part 26 of the Companies Act 2006, marking yet another significant merge.
Acquisition Structure
The structure of this acquisition involves a court-sanctioned scheme of arrangement, which will see i3 Energy shareholders receiving both cash and shares in Gran Tierra. Specifically, i3 Energy shareholders are to receive one Gran Tierra share for every 207 i3 Energy shares held, in addition to 10.43 pence in cash for each i3 share. An extra cash dividend of 0.2565 pence per i3 Energy share will be distributed in place of the typical quarterly dividend for the period ending September 30, 2024.
Financial Implications
Financially, this deal implies a value of 13.92 pence per i3 Energy share, providing a notable premium—49% over the closing price of i3 shares as recorded on August 16, 2024. This substantial premium highlights the value that Gran Tierra sees in i3’s assets and future prospects, making the deal lucrative for i3 shareholders.
Strategic Benefits
The strategic motivation behind this acquisition is to create an independent energy company with enhanced scale, better capital allocation capabilities, and the potential for improved shareholder returns. A significant advantage of this merger is the geographic and product stream diversification; the combined entity will operate across the Canadian, Colombian, and Ecuadorian oil and gas markets, offering an expansive reach.
Timeline and Process
A scheme document detailing the acquisition’s full specifics will be published within 28 days from the announcement date. Subject to obtaining various approvals from shareholders, regulatory bodies, and authorities in the UK and Canada, the acquisition is expected to be finalized by the fourth quarter of 2024.
Mix and Match Facility
i3 Energy shareholders will have the option of a Mix and Match Facility, allowing them to choose different proportions of cash and Gran Tierra shares. However, the total cash and shares circulated will remain fixed, ensuring a balanced transaction.
No Increase Statement
Gran Tierra Energy has also committed that the financial terms set forth in this deal are final and will not be altered, except in the event that a superior offer is proposed by a third party. This statement underscores the confidence and finality Gran Tierra places on the value and terms of this acquisition.
Overarching Themes
The acquisition aims to leave a lasting impact through value creation for shareholders. This will be achieved by leveraging increased production capacities, enhanced reserves, and a fortified balance sheet. Strategically, the acquisition aligns with Gran Tierra’s focus and expertise, particularly in the Western Canadian Sedimentary Basin, an area of significant knowledge and experience for the company.
Operationally, the merger will employ Gran Tierra’s robust balance sheet to expedite i3 Energy’s asset development, promising optimized capital allocation and better returns. Employee retention is another critical consideration, with most roles maintained, though i3’s headquarters will relocate to Calgary, affecting a small number of UK-based employees.
Main Findings
The acquisition is designed to form a robust, independent energy company with extensive reserves, broadened geographic exposure, and better capital allocation efficiency. The financial terms offer i3 Energy shareholders a substantial premium with additional future gains through stakes in the combined group. Enhanced operational scale is expected to draw greater investment interest due to improved trading liquidity and market significance. Furthermore, approval from regulatory bodies and shareholders is awaited as the final step toward sealing the deal.
Conclusion
In a significant move poised to transform the energy landscape, Gran Tierra Energy, Inc., a well-regarded US-based oil and gas exploration and production company, has announced its acquisition of UK-based i3 Energy plc for roughly £174.1 million, which is about US$225.4 million. This strategic acquisition will be carried out through a scheme of arrangement under Part 26 of the Companies Act 2006, highlighting another notable merger within the sector.
Gran Tierra Energy, known for its robust presence in the Americas, aims to expand its global footprint through this acquisition. Successfully integrating i3 Energy’s assets and operations is expected to bolster their portfolio and improve operational efficiency. This move also signifies Gran Tierra’s commitment to sustainable and diversified energy production, aligning with broader market trends seeking to balance traditional oil and gas exploration with progressive practices. Analysts suggest this acquisition could pave the way for future investments and mergers, underscoring Gran Tierra’s ambitious growth strategy and solidifying its standing as a key player in the global energy market.
