Israel's Delek Offers to Buy All of Ithaca Energy to Expand North Sea Assets

Offer, which is backed by U.K. company’s board, values the firm at $646 million.

A 2012 file photo of the Elgin oil rig, 150 miles from Aberdeen in the North Sea of which energy giant Royal Dutch Shell is a shareholder. It has agreed to sell a chunk of its North Sea assets to oil explorer Chrysaor, it said on January 31, 2017. T
JONATHAN NACKSTRAND/AFP

In a move that would greatly expand its North Sea energy holdings ahead of a planned London listing, Delek Group said on Monday it was offering to buy the rest of Ithaca Energy it doesn’t already own in a deal valuing the oil producer at $646 million.

Ithaca, listed in Toronto and London, said its board had recommended the Israeli conglomerate’s cash offer of 1.95 Canadian dollars (about $1.50) per share. Delek, with natural gas exploration and production activities in the eastern Mediterranean, already owns 19.7% of Ithaca.

The offer, a premium of about 12% to Ithaca’s closing price of C$1.74 on Friday, implies an enterprise value of about $1.24 billion, Ithaca said.

Ithaca has its headquarters in the Scottish city of Aberdeen and is focused on North Sea oil and gas.

Shares of Delek were up 0.45% to 821.70 shekels ($217) in late trading on the Tel Aviv Stock Exchange.

The market for North Sea assets has heated up in recent months as oil prices have steadied above $50 a barrel. Last month Chrysaor, backed by private equity, said it would buy many of Shell’s North Sea assets for up to $3.8 billion and EnQuest agreed to buy a 25% stake in BP’s Magnus oil field.

Delek itself bought a 13.18% stake in Faroe Petroleum, another North Sea operator, for 43 million pounds ($53.7 million) in December.

Delek’s $524 million bid for 80% of Ithaca values the company’s shares at $646 million and is conditional upon more than 50% of shares not held by Delek accepting the offer.

“This is a full and fair offer from a very credible buyer who have the financial resources to complete the transaction,” said Ithaca CEO Les Thomas.

“They are knowledgeable, they are credible, they can back up the offer and complete the transaction.”

Delek CEO Asaf Bartfeld said the Ithaca deal would contribute to the company’s growth and to solidifying its position in the international market.

A spokesman for Delek said the company plans to list in London this year but could not say whether new shares would be sold or give further details.

In August Delek said it was considering spinning off its holdings in the large Tamar natural gas field into a separate company traded abroad.

Under a deal reached with the Israeli government to boost competition in the sector, Delek has about five years to sell its 31.25% stake in the offshore field.

Ithaca is a partner in 25 projects and is the operator in 12 of them, including the Stella field in the North Sea which is expected to begin production later this month. Delek said Stella will be a big step up for Ithaca in terms of production amounts.

BMO Capital Markets analyst David Round said Ithaca has been seen as a takeover candidate. “This looks like a reasonable price, although Delek is clearly retaining some upside, particularly around Ithaca’s ‘pre development’ portfolio as well as its attractive tax loss position,” he said.