Petronas and Calgary, Alberta-based Progress Energy said they had agreed to a C$20.45 per share offer, equal to a 77% premium to the target's Wednesday closing price of C$11.55 and an 83% premium to Progress Energy's 30-day average of C$11.18.

"Our asset base requires extensive capital to develop its large potential and ultimately access international [liquefied natural gas] markets," Progress Energy president and CEO Michael Culbert said in a statement. "Petronas offers the size and scale that will enable our company to continue to grow and not be limited by the same cash flow challenges faced by many producers in the North American natural gas market today."

Petronas teamed with Toronto-listed Progress Energy in June last year, when it paid C$1.07 billion for a 50% stake in the North Montney Shale project in northeast British Columbia. That investment was part of a wider plan to export Canadian gas from the west coast of British Columbia to Asia, where gas prices remain as much as 90% higher than in North America. Petronas CEO Shamsul Azhar Abbas said in March that he was looking for further assets in Canada and Australia.

The acquisition of Progress Energy will be Petronas' biggest-ever takeover, topping its $2.5 billion deal for 40% of Santos Ltd.'s Gladstone LNG project, which was struck in 2008.

Based on the enterprise value of C$5.5 billion, Petronas will pay about 22 times Progress Energy's Ebit of C$252 million for 2011. Progress Energy had sales of C$470.2 million in 2011, about 65% of which comes from its shale gas operations. Progress Energy said in February that new finds had increased its proved and probable reserves by 28% over 2011 to about 323 million barrels of oil equivalent, meaning that Petronas is paying about C$17 per barrel of reserves.

Petronas' bid values Progress Energy's equity at about C$4.8 billion. Kuala Lumpur-based Petronas will also offer Progress Energy's debenture holders C$1,202 for 5.25% debentures maturing in 2014 and C$1,162 for 5.75% debentures maturing in 20 16. The holders of the two debenture classes will be allowed to vote to determine if they accept their part of the deal.

The offer has the support of the holders of about 25% of Progress Energy's stock, including company directors and the Canada Pension Plan Investment Board. The agreement includes a nonsolicitation clause but allows Progress Energy to withdraw its support for Petronas' offer if it receives a superior bid. Petronas has the right to match a higher offer and will collect a C$150 million breakup payment if Progress Energy's directors withdraw their support. Shares in Progress Energy traded early morning in Toronto at C$20.15, up C$8.60, or 74.5%, on their Wednesday closing price.

Petronas is taking financial advice from Bank of America Merrill Lynch, which advised it on the initial JV investment with Progress Energy. Norton Rose Canada LLP is acting as legal counsel to Petronas. BMO Capital Markets is providing financial advice to Progress Energy. Scotia Waterous provided the Progress Energy board with an independent fairness opinion. Burnet, Duckworth and Palmer LLP is providing counsel to Progress Energy. Both BMO and Burnet Duckworth worked with Progress Energy on the initial JV deal.