Calgary-based Canacol announced Monday it would acquire Shona Energy Company Inc. (TSXV:SHO) in a deal expected to close in December.
Under the terms of the deal, each Shona common share will be exchanged for 8.9 cents and 1.06 of a Canacol share. Each preferred share will be exchanged for US$100.
Canacol says that values each Shona common share at about 56 cents apiece.
Canacol shares were among the most actively-traded Tuesday on the Toronto Stock Exchange with some 6.9 million changing hands. Its stock closed 2.5 cents lower at 38.5 cents a share. It was the company's lowest closing price since December 2009.
Shares in Shona, an oil and gas exploration and production company focused on Colombia and Peru, jumped 28 per cent or 10 cents to 46 cents per share, still short of the offer price.
Shona has net proven and probable reserves of approximately 95 billion cubic feet or 15.8 million barrels of oil equivalent.
Canacol, an exploration and production company with operations focused in Colombia and Ecuador, said the deal will help it to grow at a low cost, particularly in Colombia.
"The size of the combined company and its stable production and cash flow streams will facilitate easier access to capital and open up additional consolidation opportunities, particularly in Colombia," said Charle Gamba, CEO and President of Canacol.
"The transaction positions us to take a leading role in an expanding gas market in Colombia at a low entry price, and also adds three conventional heavy oil exploration contracts to our already extensive exploration position in the Caguan - Putumayo basin."