Swiss Glencore to buy Chad oil firm

April 15, 2014 | Africa, Mergers, Acquisitions & JVs

London – International mining company Glencore Xstrata has agreed to buy Chad-focused oil company Caracal Energy for about £800m a deal that will allow the commodity giant to expand upstream in the oil sector.

The sale puts an end to Caracal’s proposed merger with Canada’s TransGlobe Energy Corporation.

Swiss-based commodity producer and trader Glencore agreed to pay 550 pence per share for Caracal, which has been its partner in Chad since 2012, the two companies said in a joint statement put out by Glencore on Monday.

The price represents a 61% premium to Caracal’s closing share price on Friday.

Caracal said it had terminated the proposed merger with TransGlobe and had paid a break-fee of $9.25m to the Canadian company for abandoning the deal, the statement said.

Caracal’s shares surged more than 58% in London after the announcement on Monday to 540.6 pence and shares of TransGlobe were up 0.3% in Toronto after lunch.

Investec analyst Marc Elliott said: “Glencore is already in Chad, so they’ll be knowledgeable of the assets and oil is certainly an area that they have indicated they want to get into to a larger degree to create more diversification. This acquisition fits in with their strategy.”

In 2011, Caracal entered into three production-sharing contracts with Chad, which give the company and its partners exclusive rights to explore and develop reserves and resources in an area of southern Chad.

Glencore bought a 33% stake in those three contracts in 2012 and also acquired from Caracal a 25% share in the Magara and Badila fields which are expected to start exporting through the Chad-Cameroon pipeline later this year.

Glencore on Monday also announced the long-awaited sale for $6bn of its Las Bambas copper mine in Peru to a Chinese consortium.

Shares in Glencore were up 1% in London on Monday, outperforming a flat market.