Executive summary

This report is prepared for the purpose of examining the acquisition of ATI Oil PLC by Northern Petroleum PLC in 2009. There are several parts included in this report; background information has illustrate the characteristics of these two companies, and their operations; motives section has explained the purposes of the acquisition, which is to obtain the licence of operation in Italy, where it has been assessed that there have been a large amount of reserves. In addition to explain the purpose of the acquisition, literature reviews have been provided to support the arguments for this acquisition. Then, in considering the firm, industry and market specific factors, it has been indicated that Northern Petroleum PLC can enhance its competitive position in the industry by acquiring ATI Oil PlC. In regards to the valuation of the ATI Oil PLC, different valuation methods have been explained with the advantages and disadvantages of each method, and indicating that the discounted free cash flow method is the most appropriate method to estimate the value of ATI Oil PLC, and the valuation multiple methods can be used as indicative. Finally, the recommendation would have suggested that the stock swap method for settling the acquisition would have been used when the value of ATI Oil PLC has been undervalued, but the stock of Northern Petroleum PLC has been overvalued. From the website of the Northern Petroleum PLC, it can be found that the acquisition has contributed to the success of this company.

Background information
Northern Petroleum Plc is a United Kingdom-based oil and gas exploration company. There are various operations and activities this company has engaged, such as exploration, development and production of oil and gas assets in Europe. The coverage of their operation and activities include Netherlands, Italy, United Kingdom and Guyame. ATI Oil PLC is a UK company with headquarter located in London, which is an oil and gas exploration and production company.  This company has a project office in Rome, Italy. Before the acquisition, ATI is a plus market quoted company with market capitalization of roughly 10.4 million pounds (operation in Italy, 2012). ATI, at that time, had one material asset of the non-operated indirect interests in the most of the Northen’s Italian licence interests.
The purpose of the deal is to strengthen Northern Petroleum PLC’s Italian position. The deal has been announced on 04 March 2009. Subject to shareholders’ approval, Northern Petroleum PLC acquired ATI Oil PLC for USD 9.90 million, with the acquiring of 62.96% of share capital, with the tender offer, stock swap and scheme of arrangements as its acquisition techniques. And thus, it can be disclosed that on 31th December 2010, Italy had operations in four onshore permits, 22 offshore applications, 10 offshore permits and net portable oil reserves of 53.2 million barrels (Operation in Italy, 2012).#p#分頁標題#e#

Executive summary...................2
Background information.....................2
Motives.....................................4
Firm, industry and market ..............................6
Valuation.....................................6
Recommendations.............................10
Reference..................................10

Reference:
Goel, A.M. Nanda, V. and Narayanan, M.P. (2004) “Career concerns and resources allocation in conglomerates”, Review of Financial Studies, Vol. 17, No. 1, pp. 99-128.Moeller, S.B. Schlingemann, F.P. and Stulz, R.M. (2004) “Firm size and the gains from acquisitions”, Journal of Financial Economics, Vol. 73, pp. 201-228.Northern Petroleum, [online] “operation in Italy”, Northern Petroleum, assessed 01 April 2012, fromPau, P.R. and Vermaelen, T. (1997) “Glamour, value and the post-acquisition performance of acquiring firms”, Journal of Financial Economics, Vol. 49, pp. 223-253.Thompson OneBanker Database, [online] “Deal synopsis and purpose-Northern Petroleum PLC to acquire ATI Oil PLC”, Thompson OneBanker Database, assessed Wu, H. Fargher,N. and Wright, S. (2010) “Accounting for investments and the relevance of losses to firm value”, Journal of Accounting, Vol. 45, pp. 104-127.