Canadian Superior Inc. said Friday it plans to buy Challenger Energy Corp. in a friendly transaction worth an estimated C$78 million (US$69 million) including debt. The merger would give back to Canadian Superior a stake in a promising Trinidad natural gas project that it has been developing for several years.

Calgary-based Canadian Superior is undergoing a restructuring after filing for bankruptcy earlier this year (see Daily GPI, April 28). Under the merger agreement, Canadian Superior plans to issue 0.51 share, or C$0.435, for each Challenger share, which represents a premium of about 36% to Challenger’s closing price on Thursday. The transaction would include the assumption of Challenger’s C$54 million in net debt.

Challenger, which is also based in Calgary, is prohibited from soliciting or initiating any discussion on other business combinations or sale of assets under the agreement. A C$3 million termination fee included in the deal allows Canadian Superior to match competing, unsolicited offers.

The transaction is part of a plan by Canadian Superior to restructure under Canada’s Companies’ Creditors Arrangement Act. Earlier this month as part of the restructuring process Canadian Superior agreed to sell to UK-based Centrica plc a 45% interest in Block 5(c) offshore Trinidad, for US$142.5 million in cash (see Daily GPI, June 3).

The block is operated by BG Group, which holds a 30% stake, and Challenger, which still has a 25% stake. The discovery, made in 2005, may hold up to 5 Tcf (see Daily GPI, Aug. 15, 2008).

The combined company would produce an estimated 3,050 boe/d, Canadian Superior said. Output would be 85% weighted to natural gas. Besides undeveloped assets in Alberta and British Columbia, the combined company would hold a diversified suite of assets in Trinidad and Tobago and North Africa.

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