Glencore Xstrata to buy Caracal Energy

Just a day after the ink dried on Glencore Xstrata‘s (LSE: GLEN) all-cash agreement to sell its Las Bambas copper project  in Peru to a Chinese consortium for nearly US$6 billion, the Swiss-based commodities giant announced a US$1.35 billion all-cash bid to acquire Caracal Energy (LSE: CRCL).

Glencore is offering shareholders of Caracal £5.50 (US$9.20) per common share, a 61% premium to Caracal’s £3.42 per share closing price on April 11 and a 54% premium to Caracal’s volume-weighted average trading price of £3.47 per share in the 30 trading days prior to the bid.

The offer trumps a previous agreement Caracal had worked out to merge with Canada’s TransGlobe Energy, and as a result Caracal must pay a US$9.25 million termination fee to the Calgary-based company.

Caracal’s board of directors has unanimously approved the arrangement with Glencore, and Gary Guidry, the company’s president and chief executive officer, described Glencore’s offer as an “excellent outcome” for shareholders.

Glencore’s relationship with Caracal dates to 2012, when it agreed to invest US$300 million to acquire a 33.3% interest in Caracal’s three production sharing contracts — which give the company and its partners the right to explore and develop reserves and resources in southern Chad — plus a 25% share in the Mangara and Badila oil fields. Glencore later acquired a further 10% stake in the Mangara and Badila fields from Chad’s state oil company, SHT, bringing its stake in the two fields to 35%.

Under a separate pre-financing deal, Glencore also has export off-take rights for 90% of SHT’s oil production and has an exploration portfolio in Chad of more than 80 prospects and leads that are analogous to existing discoveries.

Marc Elliott, an analyst at Investec Securities in London, commented in a research note to clients that Glencore is “clearly comfortable with the jurisdiction” and has “considerable familiarity” with Caracal’s projects.

“Management has previously indicated an interest in growing its oil portfolio, and this presents a meaningful way to do so, as well as strengthening its position in country,” he continued. According to his figures, Glencore traded 728 million barrels of oil products in fiscal 2013.

The analyst also pointed out that Glencore clearly remains “focused on acquisitions,” and that it has not updated its comments from April 13 that it plans to return some of the cash from the sale of Las Bambas to shareholders.