Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.
What: Shares of oil exploration and production company Coastal Energy (TSX: CEN) soared 27% today after Spanish counterpart Cepsa agreed to acquire it for about $2.3 billion.
So what: The all-cash deal values Coastal at $19 per share and represents a juicy premium of about 28% to its closing price on Monday. Cepsa is making the move to expand its E&P capabilities in Southeast Asia, and given Coastal’s share-price plunge last week, management has sure found an opportune time to do it.
Now what: Cepsa will incorporate a newly controlled entity for the purchase in which investment firm Strategic Resources will be an investor. “Coastal’s business comprises a high-quality portfolio of upstream assets located in Southeast Asia, operated by talented management and dedicated employees,” Cepsa CEO Pedro Miro said in a statement. “We believe that Coastal provides a tremendous foundation for furthering our E&P strategy.” Given the overwhelming support for the sale by Coastal insiders, as well as the steep $75 million termination penalty it faces if the Board does withdraw, I think it’s fair to say that the deal is all but closed at this point.
