TLM.PR.A Deal Approved – Redemption Coming Soon?

Talisman Energy Inc. has announced:

that the holders of its Common Shares and Preferred Shares have approved the proposed arrangement under which Repsol S.A., through a wholly-owned subsidiary, is to acquire all of the outstanding shares of Talisman. Of the votes cast, over 99% of holders of each class of shares voted in favour of the agreement at the special meeting of shareholders held earlier today.

The completion of the arrangement remains subject to the granting of a final order by the Court of Queen’s Bench of Alberta, the receipt of required regulatory approvals and the satisfaction or waiver of other customary closing conditions. It is anticipated that the completion of the transaction will occur in the second quarter of 2015 and all regulatory approvals are on track.

However, it looks like shareholder approval was already factored into market prices, since the common closed at $9.51, well within its range of the past two weeks and actually down $0.02 on the day, while the preferred improved from 24.00-12 yesterday to 24.25-34 today.

It looks like traders are still accounting for a healthy amount of deal risk, since the common closed today at USD 7.68 on the New York Exchange, with a closing quote of 7.45 bid without. The day’s range was 7.65-71, compared with a deal price of USD 8.00, which (at today’s currency close of 1.2459), equates to CAD 9.57. The USD 7.68 close represents a 4% discount to deal price.

Thus, given that the preferreds are bid at 24.25, and will go ex-dividend for $0.2625 on March 11 (estimated) payable March 31 (estimated), both issues are showing comparable deal-risk.

Is it too much or too little? I don’t know – as I stated in my initial report on the potential deal, I don’t do deal risk. I will, however, bet a nickel that if the deal falls through, the preferreds will drop by $10.00 instantly.

The deal has attracted the usual weeping and wailing over a head-office closing from the usual suspects, who consider Canadians to be too stupid to take whatever money they’ve made from the investment to start new companies.

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