Verenex agrees to Libya offer as China sale blocked

CALGARY, Alberta (Reuters) - Verenex Energy Inc confirmed on Thursday it will sell its operations to the Libyan Investment Authority for at least C$316.8 million, ending a battle in which the Libyans blocked a better offer for the Canadian oil producer from a Chinese oil company.

The final terms match the original offer made in September, but Verenex, which operates mostly in Libya, said the LIA had also agreed to compensate its shareholders for the company's working capital, an amount it expects will add at least another 15 Canadian cents to the C$7.09 per share offer.

The price is well below China National Petroleum Corp's

C$10 per share bid for the company, which was canceled in September when Libya refused to approve that deal so that it could keep Verenex's oil discoveries itself.

With the North African country blocking any other offer, Verenex's board said the price was "the best alternative reasonably available to Verenex and its security holders".

"It's good, given all that's happened, to get something, but I don't think it's a win for shareholders when C$10 was the price originally agreed," said one New York-based Verenex investor, who could not be named because of company policy.

Verenex said its shareholders will need to approve the agreement, but LIA has deposited an irrevocable C$350 million letter of credit into escrow until all conditions on the agreement can be waived.

Shareholders holding at least 75 percent of Verenex's shares will need to approve the deal at a vote on December 11. However the company's directors, executives and its largest shareholder, holding 45.2 percent of the outstanding stock, have agreed to vote in favor.

Verenex shares rose 22 Canadian cents, or 3.2 percent, to C$7.02 late on Thursday morning on the Toronto Stock Exchange.