Delek Group acquires Ithaca Energy for US$516 million

Report summary

Delek Group has offered a cash consideration of US$1.50 per share for the remaining 80.3% of Ithaca Energy shares it doesn't own. This is a 12% premium to the closing price on the TSE. The bid ascribes Ithaca a total EV of US$1.24 billion (including net debt of US$598). The deal will give Delek a stake in the flagship Greater Stella Area, due onstream February 2017, plus interest in nine producing assets in the UK North Sea. Our commercial valuation is lower than the bid price, though upside exists in the Hurricane and Austen assets, which we currently hold as sub-commercial. The deal will see Delek's production jump by more than 60% in 2017 and by 50% in 2018. The boost to Delek Group's revenue will be even greater, due to the volume of liquids. The deal will see Delek diversifying from its current position relying solely on gas production from the giant Tamar gas field in Israel. For Ithaca shareholders this deal offers a fair price cash exit after a rollercoaster two years.