In addition to being acquired by Strike, Talon plans to demerge its Mongolian asset through a potential spin-out of the assets before implementation of the scheme, which allows its shareholders with interest in the assets, along with A$850,000 cash
Australia-based joint venture partners Strike Energy and Talon Energy have signed a binding scheme implementation deed, under which Strike will acquire all the issued shares of Talon via a scheme of arrangement.
Under the terms of the scheme, Talon shareholders would receive 0.4828 new Strike shares for each Talon share held.
In addition, Talon plans to demerge its Mongolian asset through a potential spin-out of the assets before the implementation of the scheme.
The separation is expected to allow Talon shareholders to retain an interest in the assets, along with A$850,000 cash.
Talon’s Board of Directors unanimously recommend the proposed transaction.
The scheme is subject to certain conditions, including Talon shareholders’ approval, approval by the Court, review by an Independent Expert, and no adverse change for either Strike or Talon.
Upon implementation of the Scheme, Strike shareholders will own around 89% and Talon shareholders around 11% of all issued Strike shares, on a pro-forma basis.
Strike said that the acquisition will be accretive for its earnings and cashflow and will help advance the development of its Perth Basin gas assets.
Strike MD and CEO Stuart Nicholls said: “This is an earnings accretive transaction for Strike that will simplify Strike’s operations and provide a platform to remove the costs in operating and managing its existing joint venture with Talon.
“The combined group will have the capacity to generate initial annualised cashflows in excess of A$82m from the Walyering gas field alone.
“The additional free cashflow generation will support an acceleration of Strike’s Government-endorsed Perth Basin development strategy.”
As part of the deal, Strike has signed a binding facility agreement with Talon, to provide A$6m convertible financing facility to fund its short-term working capital needs.
Strike said that the acquisition will provide certain benefits, including a capacity to generate an initial annualised revenue of more than $82m from the Walyering gas field alone.
The transaction will significantly reduce its costs through corporate and operational synergies and improve its balance sheet through enhanced access to debt markets among others.
The combined entity will have an average of 1,022 PJ of independently certified Perth Basin conventional gas 2P Reserves and 2C Resources, said Strike.