Mexico’s ALFA S.A.B. and US-based Harbour Energy are terminating the proposed US$5.3 billion acquisition of Toronto-based Pacific Rubiales Energy.
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Image from Pacific Rubiales. |
"The early proxy returns suggested that a significant number of shares would be voted against our proposal," said Linda Cook, Harbour Energy CEO. "As previously stated our offer of $6.50 CAD per share was full, fair and final, and therefore we have no plans to revise the proposal. As a result, we have agreed with the company to terminate the arrangement agreement."
"As we stated in our communication dated 25 June 2015, we thought our offer correctly valued Pacific Rubiales," said Alvaro Fernandez, ALFA president. “We are not willing to change our offer, therefore we are terminating the arrangement agreement. We remain committed to pursue opportunities in the Mexican energy sector and will decide on the alternatives we have."
The planned takeover made on 20 May, was for a cash deal of $5.11 ($6.50 CAD) per share in addition to assuming the company’s debt of $3.9 billion. The deal would have had ALFA and Harbour Energy takeover the remaining 81.05% stake of Pacific Rubliales that were not already held by ALFA. ALFA will continue to hold its 18.95% stake in the company.
According to Pacific Rubiales, the termination is effective immediately, and ALFA and Harbour Energy are free of any termination/break fees or expense reimbursement.
In June, Matthew Jurecky, GlobalData’s head of oil and gas research and consulting referred to the ALFA/Harbour Energy announcement to acquire Pacific Rubiales as the Americas’ top deal in May. This represents the fourth largest upstream deal announced since oil prices collapsed, after Shell’s acquisition of BG, Repsol’s purchase of Talisman, and LetterOne acquiring RWE’s upstream assets, he said.
“If Alfa’s offer proves successful, the company will have skillfully capitalized on low oil prices ravaging Pacific Rubiales’ share price, which has dropped by over 70%. Although a significant premium is being paid to the current price, rising oil prices would ultimately make the deal a bargain. Furthermore, it is a strong move strategically for more participation in Mexico, one of the top upstream markets globally in terms of opportunity,” Jurecky said in June.
ALFA/Pacific Rubiales JV to proceed
In December 2014, Pacific Rubiales and ALFA entered into a deal to create a 50:50 joint venture for business development in Mexico.
According to Pacific Rubiales, the company will continue to pursue Mexico energy opportunities with its preferred joint venture partner ALFA.
The JV will focus on the study of, and the bidding on assets in Mexico’s initial oil and gas bid round; acquiring service contracts to transfer them to exploration and production contracts; the development of petroleum and natural gas assets in Mexico; and the development of any business ancillary to the petroleum business in Mexico, including midstream projects.
The two companies will work together to jointly identify, discuss, evaluate and undertake the joint venture prior to the first bid round. In addition, the JV remains subject to any applicable regulatory approvals and the determination of the joint venture structure pursuant to a definitive agreement.
The first bid round is scheduled to begin next week.
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