Glencore Xstrata Buys Caracal -- Update

By Alexis Flynn 

LONDON-- Glencore Xstrata PLC snapped up African-focused oil producer Caracal Energy Inc. on Monday for $1.35 billion in cash, just hours after selling a Peruvian copper mine for nearly $6 billion and putting paid to a rival deal between Caracal and Canadian oil company TransGlobe Energy Corp .

The Swiss-based mining and trading giant will acquire London-listed Caracal in full for around $9.20 a share, according to a joint statement from the companies. Caracal, whose main assets are oil fields in the central African nation of Chad, had been on the verge of merging with TransGlobe Energy.

Glencore's acquisition of Caracal underscores its ambition to increase its oil market presence, and its willingness to buy assets in politically risky countries. It will take over Caracal's operatorship of its Chadian oil fields which are located near giant fields operated by U.S. firm Exxon Mobil Corp. Although Glencore has a number of stakes in various West African oil fields, this is the first producing field that it will manage and control itself.

Chad, an oil and mineral-rich former French colony in the Sahel region that cuts between North and sub-Saharan Africa, is relatively peaceful. But it is situated in a tough neighborhood--the Central African Republic to its south is embroiled in a bloody interreligious conflict.

The deal reinforces the ties between Glencore Xstrata and Caracal, which produced around 25,100 barrels of oil a day last year. Since 2012, Glencore Xstrata has held a 25% stake in several of Caracal's Chadian oil fields after agreeing to provide $300 million of financing to the company.

"Both companies have had a successful partnership since 2012. This transaction deepens our relationship, adding further value and expertise to our growing oil business in Africa," said Alex Beard, head of Glencore's oil division.

For Caracal shareholders, the largest of whom is the family trust of founder Bradley Griffiths, who died in a boat accident in 2011, the all-cash Glencore offer represents a 61% premium to the value of their shares on Friday.

Caracal Chief Executive Gary Guidry said it represented an "excellent outcome" for the company's investors.

"Glencore has been an important supporter and partner of Caracal in Chad and this is a natural progression in the development of this portfolio," said Mr. Guidry.

The deal will be subject to a Caracal shareholder vote in early June, though it isn't subject to the approval of the government of Chad, the companies said.

Write to Alexis Flynn at [e-mail]

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