Israel's Delek Group Ltd. offered to buy Ithaca Energy Inc. in a deal valuing the North Sea oil producer's equity at $646 million and building on Delek's expansion in the North Sea ahead of a planned London listing.

Ithaca, listed in Toronto and London, said Feb. 6 its board had recommended the Israeli conglomerate's cash offer of C$1.95 per share, which equates to 1.20 pounds. Delek, with natural gas E&P activities in the eastern Mediterranean, already owns 19.7% of Ithaca.

The offer, a premium of about 12% to Ithaca's closing price of C$1.74 on Feb. 3, implies an enterprise value of about $1.24 billion, Ithaca said.

Ithaca has its headquarters in the Scottish city of Aberdeen and is focused on North Sea oil and gas. The market for North Sea assets has heated up in recent months as oil prices have steadied above $50 a barrel.

Last month Chrysaor Holdings Ltd., backed by private equity, said it would buy many of Royal Dutch Shell Plc's (NYSE: RDS.A) North Sea assets for up to $3.8 billion. In addition, EnQuest Plc agreed to buy a 25% stake in BP Plc's (NYSE: BP) Magnus oil field.

Delek itself bought a 13.18% stake in Faroe Petroleum Plc, another North Sea operator, for 43 million pounds (US$53.7 million) in December.

Delek's $524 million bid for 80% of Ithaca values the company's shares at $646 million and is conditional upon more than 50% of shares not held by Delek accepting the offer.

"This is a full and fair offer from a very credible buyer who have the financial resources to complete the transaction," Ithaca CEO Les Thomas told Reuters.

"They are knowledgeable, they are credible, they can back up the offer and complete the transaction," Thomas said.

London Listing

Delek CEO Asaf Bartfeld said the Ithaca deal would contribute to the company's growth and to solidifying its position in the international market.

A spokesman for Delek said the company plans to list in London during 2017 but could not say whether new shares would be sold or give further details.

In August Delek said it was considering spinning off its holdings in the large Tamar natural gas field into a separate company traded abroad.

Under a deal reached with the Israeli government to boost competition in the sector, Delek has about five years to sell its 31.25% stake in the offshore field.

Ithaca is a partner in 25 projects and is the operator in 12 of them, including the Stella Field in the North Sea which is expected to begin production later this month. Delek said Stella will be a big step up for Ithaca in terms of production amounts.

BMO Capital Markets analyst David Round said Ithaca has always been seen as a takeover candidate.

"This looks like a reasonable price, although Delek is clearly retaining some upside, particularly around Ithaca's 'pre-development' portfolio as well as its attractive tax loss position," Round said in a research note. (US$1 = 0.8030 pounds)

Offshore