The S&P/ASX 200 Energy index may be charging higher today but the same cannot be said for a couple of ASX energy shares.
The two shares in question are Strike Energy Ltd (ASX: STX) and Talon Energy Ltd (ASX: TPD), which have been sold off and are sinking like stones on Tuesday.
Strike Energy shares are currently down almost 8% and Talon Energy shares have fallen over 18%. But why?
Why are these ASX energy shares sinking?
Investors have been hitting the sell button today after Strike Energy withdrew its revised non-binding indicative proposal to acquire Talon Energy.
The deal that was briefly on the table was 0.4828 Strike shares for every Talon share held, as well as an ownership interest in Talon's Mongolian assets that were to be spun off into a separate listing.
The proposal had an implied price of $0.21 per Talon share, which represents a premium of 20% to where the ASX energy share traded before initial media speculation regarding a potential transaction.
Talon shareholders would also receive value for the Mongolian assets net of related transaction costs. Though, the amount of that value was uncertain.
What happened?
The release explains that the two ASX energy shares failed to reach an agreement on final terms. And while Talon Energy was prepared to keep negotiating, it seems that Strike Energy couldn't see a way to make a deal work. The Talon Energy release explains:
Talon and Strike undertook to reach an agreement on the terms of a scheme implementation deed and working capital facility prior to the resumption of trading on Tuesday 1 August 2023. Each party was also allowed to conduct a period of due diligence on the other party. Despite extensive negotiations the parties were unable to reach an agreement on final terms within that timeframe. While Talon was prepared to continue to negotiate with Strike beyond the resumption of trading on Tuesday 1 August 2023, the Revised Proposal was withdrawn.
Strike provided its take on how events unfolded. It said:
Following the findings of Strike's financial and technical due diligence and resultant negotiation of the finance facility, the parties were unable to reach mutually agreeable terms to proceed. As a result, Strike's Board of Directors have ceased engagement and will continue to operate the Walyering L23/EP447 Joint Venture in the normal course of business as part of Strike's leading Perth Basin exploration, appraisal and development program.
