Cepsa to Acquire Coastal Energy for $2.2B

Coastal Energy Company (Coastal or the Company) announced Tuesday that it has entered into a definitive merger agreement providing for the acquisition by Spain's Compania Espanola de Petroleos, S.A.U. (Cepsa) of all of the issued and outstanding shares of Coastal at a price of $18.21 (CAD 19.00) per common share in cash. The purchase price represents a premium of 28 percent to the closing price of the Company's common shares on the TSX Nov. 18. The purchaser is a newly-incorporated Cepsa controlled entity in which Strategic Resources (Global) Limited (SRG) is an investor. The proposed transaction has an aggregate value of approximately $2.20 billion (CAD 2.3 billion) including the assumption of $48.87 million (CAD 51 million) of net debt. The transaction, which will be completed by way of statutory merger, is expected to close in the first quarter of 2014.

Commenting on the acquisition, Randy Bartley, CEO of Coastal said, "This transaction delivers significant and immediate value to our shareholders. Our Board of Directors is unanimous in its view that this transaction is in the best interests of Coastal Energy Company and recommends shareholders vote in favor of this transaction."

Cepsa CEO Pedro Miro commented, "Today's announcement reflects an important step in increasing Cepsa's E&P capabilities. Coastal's business comprises a high-quality portfolio of upstream assets located in Southeast Asia, operated by talented management and dedicated employees. We believe that Coastal provides a tremendous foundation for furthering our E&P (exploration and production) strategy."

Jho Low, spokesperson for SRG added, "We are excited to invest with Cepsa in Coastal. With our strong relationships in Asia and Cepsa's strength in the E&P, we believe we can grow Coastal's footprint in Asia and further enhance the Company's operations."

The transaction will be funded by Cepsa's and SRG's available financial resources.

Recommendation of the Coastal Energy Company Board of Directors

The Board of Directors of the Company, after consulting with its financial and legal advisors, has unanimously determined that the transaction is in the best interest of the company and that the consideration being offered to the Company's shareholders is fair from a financial point of view. The Board of Directors has resolved to unanimously recommend that the Company's common shareholders vote their shares in favor of the merger at a meeting of shareholders to consider the transaction which is expected to occur in early January 2014.

Additional Information on the Transaction

The definitive merger agreement provides for, among other things, a non-solicitation covenant on the part of Coastal, subject to customary "fiduciary out" provisions, that entitles Coastal to consider and accept a superior proposal and a right in favor of the purchaser to match any superior proposal. If the definitive merger agreement is terminated in certain circumstances, including if Coastal enters into an agreement with respect to a superior proposal or if the Board of Directors of Coastal withdraws or modifies its recommendation with respect to the proposed transaction, the purchaser is entitled to a termination payment of $76,000,000.


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