Libya to pay $316 million (Can.) for Verenex Energy

Libya appears to have succeeded in its $316 million (Can.) takeover of Verenex Energy Inc., Calgary, after blocking a $499 million (Can.) bid by rival CNPC International Ltd. (OGJ Online, Aug. 28, 2009).

Uchenna Izundu
OGJ International Editor

LONDON, Sept. 23 -- Libya appears to have succeeded in its $316 million (Can.) takeover of Verenex Energy Inc., Calgary, after blocking a $499 million (Can.) bid by rival CNPC International Ltd. (OGJ Online, Aug. 28, 2009).

The Libyan Investment Authority (LIA), a sovereign wealth fund, has signed a binding memorandum of understanding to pay $7.09 (Can.)/share in cash for all of the outstanding shares of Verenex. The deal is cheaper than that proposed by CNPC, which had offered to pay in February $10 (Can.)/share and was forced to cancel it in September after months of uncertainty.

LIA and Verenex will sign a definitive agreement on or before Oct. 20. The issue now is whether Verenex’s shareholders will accept the proposal.

In August, Verenex said it was frustrated by Libya’s attempts to make a lower offer—reportedly then at a 10% discount—for the company and it threatened to sue.

The collapse of CNPC’s offer raised concern amongst analysts about whether Libya’s investment climate was any longer worth the risk with generous terms for foreign companies to come in and difficulties in getting out. The handling of the matter reportedly cost the resignation of Libya’s National Oil Corp.’s Chairman and Oil Minister Shokri Ghanem, who did not attend the September meeting of the Organization of Petroleum Exporting Countries in Vienna.

Earlier this year, Libya had pledged to match CNPC’s bid, which would provide it access to Verenex's main Libyan asset that lies in Areas 47 of the Ghadames basin, where the firm is the operator and holds a 50% working interest in the initial 5-year exploration period.

LIA was established in 2006 by the General People's Committee of Libya to manage Libya's surplus oil revenues.

Mohamed Layas, LIA executive director, said it had “assets of over $65 billion and is pleased to add the Verenex business to its oil and gas portfolio.”

Verenex’s board has unanimously endorsed this deal in the best interests of its shareholders. It will try to persuade its management and major shareholder, Vermilion Resources Ltd.—which owns about 45% of Verenex—to approve the offer.

Contact Uchenna Izundu at uchennai@pennwell.com.

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