NAL Oil & Gas Trust has agreed to acquire Calgary-based Breaker Energy Ltd. in a deal valued at $403-million, the companies announced Tuesday.
The transaction will see NAL issue 25 million trust units valued at about $310-million and assume $93-million of debt owed by Breaker.
The Breaker deal, which is expected to close early December, will be the fourth significant transaction for NAL Oil & Gas this year.
NAL also acquired Alberta Clipper and Spearpoint Energy and entered a joint venture to develop the Cardium oil play.
NAL units closed at $12.54 on Friday ahead of the holiday weekend, while Breaker shares were at $5.70 on the Toronto Stock Exchange.
The Breaker deal will see NAL gain two new core properties; the oil focused Irricana in Alberta and the Fireweed natural gas property in northeast British Columbia.
NAL will also gain approximately 140,000 net undeveloped acres through the transaction.
Breaker's executive team said they welcomed the NAL deal.
"Our asset base, which is currently weighted 45 per cent to oil, is a great fit to NAL's current asset base," said Dan O'Neil, Breaker's president and chief executive officer.
"Our assets under the financial position of NAL will allow the combined entity to high-grade its opportunities and fully develop and expand Breaker's potential in a timely manner," O'Neil added.
The boards of both companies have shown unanimous support for the transaction.
Breaker's board is recommending the company's shareholders vote in favour of the deal.
The transaction's arrangement agreement will see Breaker pay a non-completion fee of $12-million to NAL if the deal goes sour.
NAL is currently an oil and gas royalty trust that generates monthly cash distributions. However, it plans to convert into a corporation in response to a change of federal tax policy.
"The acquisition of Breaker represents another significant step in the repositioning of NAL to convert to a corporation in 2011," said NAL president and CEO Andrew Wiswell.
"Our game plan has been to add quality assets with upside opportunity through internal investment and acquisitions, and Breaker certainly fits this direction."