By J. Brock (FINN) The boards of Rockhopper Exploration plc and of Mediterranean Oil & Gas plc (MOG) are have announced that they have reached agreement on the terms of a recommended acquisition under which Rockhopper will acquire the entire issued and to be issued ordinary share capital of Mediterranean Oil & Gas plc. The Acquisition is to be effected by means of a Court sanctioned scheme of arrangement under Part 26 of the Companies Act 2006. " Under the terms of the Acquisition, shareholders of Mediterranean Oil & Gas plc will receive 6.5 pence per share comprising 4.875 pence in cash and 0.0172 shares of Rockhopper per Mediterranean Oil & Gas plc share (together the "Initial Consideration Offer").
" In addition, under the terms of the Acquisition, MOG Shareholders will receive a contingent entitlement up to a maximum amount of 3.550 pence in cash for each MOG Share (the "Contingent Consideration Offer") assuming MOG's fully diluted ordinary share capital is 451,192,831.
" The Initial Consideration Offer: " values the entire issued and to be issued share capital of MOG at approximately £29.3 million; " represents a 15.6 per cent premium to MOG's closing share price of 5.625 pence on 22 May 2014 (being the last Business Day prior to the date of this announcement); and " represents a 31.1 per cent premium to MOG's average volume weighted share price of 4.957 pence for the three months ended 22 May 2014 (being the last Business Day prior to the date of this announcement).
" The shares of Rockhopper forming part of the Initial Consideration Offer and to be issued pursuant to the Acquisition (the "Rockhopper Consideration Shares") are expected to represent approximately 2.65 per cent of the issued share capital of Rockhopper as enlarged by the Acquisition. The Rockhopper Consideration Shares will rank equally in all respects with the existing Rockhopper Shares and will be entitled to all dividends and/or other distributions declared or paid by Rockhopper in respect of Rockhopper Shares by reference to a record date falling after the Effective Date.
The Total Contingent Consideration Amount shall be calculated on the basis of 25 per cent (being the percentage interest which MOG holds in the HQ Prospect) multiplied by £0.59 multiplied by the 2C Contingent Resources of Liquid Hydrocarbons estimated to be potentially recoverable from the HQ Prospect. The Total Contingent Consideration Amount payable will be subject to a hurdle of 20 mmbbl 2C Contingent Resources of Liquid Hydrocarbons estimated to be potentially recoverable from the HQ Prospect (on a Net Basis) and will be capped at £16.0 million. The Contingent Consideration, if payable, will be equivalent to Rockhopper paying approximately US$ 1 per barrel of 2C Contingent Resources of Liquid Hydrocarbons
The Contingent Consideration Offer is conditional and subject to the cap summarised above and therefore there is no certainty that all or any Contingent Consideration will become payable in connection with the Acquisition.
" The deferred shares issued by MOG as part of a reorganisation of its share capital in 2011 will be unaffected by and will not form part of the Acquisition and the Scheme. " The cash consideration payable under the terms of the Acquisition, including any payments due under the Contingent Consideration Offer, will be financed from existing cash resources of Rockhopper.
" The MOG Directors, who have been so advised by RBC Europe Limited ("RBC"), as the independent financial adviser for the purposes of Rule 3 of the Takeover Code, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the MOG Directors, RBC has taken into account the commercial assessments of the MOG Directors.
" Accordingly, the MOG Directors intend to recommend unanimously that MOG Shareholders vote in favour of the resolutions to be proposed at the Court Meeting and the General Meeting which are to be convened to approve and implement the Acquisition.
" The MOG Directors have irrevocably undertaken to approve the necessary resolutions in respect of their entire beneficial holdings in MOG, which, in aggregate, amount to 2,588,171 MOG Shares, representing approximately 0.60 per cent of the existing issued ordinary share capital of MOG. These irrevocable undertakings will cease to be binding only if the Scheme lapses or is withdrawn and remain binding if a higher competing offer for MOG is made.
" In addition, Rockhopper has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and in favour of the resolution at the General Meeting from certain MOG Shareholders in respect of 135,297,780 MOG Shares representing, in aggregate, approximately 31.36 per cent of the existing issued ordinary share capital of MOG. These irrevocable undertakings will cease to be binding only if the Scheme lapses or is withdrawn or if a competing offer for MOG is made which represents the increase to the Initial Consideration and the Contingent Consideration set out in Appendix 3 of this announcement.
" Therefore, as at the date of this announcement, Rockhopper has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and in favour of the resolution at the General Meeting in respect of a total of 137,885,951 MOG Shares, representing, in aggregate, approximately 31.96 per cent of MOG's existing issued ordinary share capital.
" Rockhopper is an AIM-quoted exploration and production company with its principal asset being 5,800km² of prospective oil and gas acreage in the North Falkland Basin, which contains up to 450 mmbbl of 2C Contingent Resources if a gas cap does not exist on the western flank of the Sea Lion field. Rockhopper has a robust balance sheet, with current cash of approximately US$ 250 million (£147 million).
" MOG is an AIM-quoted exploration and production company with operations in Italy, Malta and France. MOG produces natural gas onshore and offshore in Italy and has a balanced portfolio of exploration, appraisal and development opportunities with reserves and contingent resources of 33 mmboe and total unrisked prospective resources of over 1,200 mmboe. Net production from the Guendalina field, MOG's principal production asset, was 35,650 scm per day as of 13 May 2014. Development activities are focused on MOG's 100 per cent operated interest in the offshore Italian Ombrina Mare discovery, which has 2C Contingent Resources of 26.5 mmboe. MOG is also undertaking high-impact exploration offshore Malta and will drill the HQ Prospect in 2014 targeting net mean unrisked resources of 27 mmboe. MOG also holds additional development and exploration opportunities in Italy, Malta and France.
" In order to become effective, the Scheme requires the sanction of the Court and must be approved by the requisite majority of MOG Shareholders. The Scheme is also conditional on, among other things, the Government of the Republic of Malta. either confirming that consent is not required for the indirect change of control of Melita Exploration Company Limited (a subsidiary of MOG) or, if it is required, giving such consent.
" It is currently expected that the Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and the General Meeting, together with the Forms of Proxy, will be posted not later than 20 June 2014 and that, subject to the satisfaction or, where relevant, waiver of all relevant Conditions, the Scheme is expected to become effective on or around 5 August 2014.
" Commenting on the Acquisition, Pierre Jungels, Chairman of Rockhopper said: "This transaction represents an important milestone for the company as we add production to our portfolio and broaden our exploration and development opportunity set, by establishing ourselves in an area our team understands well. While the acquisition cost and capital exposure are modest in relation to our balance sheet, the upside potential is significant and we believe that the new acreage will create an attractive entry platform to one of the most exciting regions in the industry at this time."
" Commenting on the Acquisition, Keith Henry of MOG said:
"This is a good transaction for our shareholders, offering them the combination of both cash and shares in Rockhopper today, while also providing the opportunity to benefit from the potential upside of our Malta well. Sadly, a series of setbacks over the past year at the Guendalina Field, MOG's principal producing asset, and the continuing regulatory delays to Ombrina Mare, our key development project, have prevented us from implementing our strategy of growing our portfolio in the Mediterranean region. In the current market conditions, the MOG board strongly believes that this can only be achieved by a significantly more capitalised company. In addition to the cash element, Rockhopper's offer represents an opportunity for MOG shareholders to receive shares in Rockhopper, while still retaining a contingent interest in the high risk exploration well offshore Malta that will spud in the next few days."
Source: RNS, London Stock Exchange. Full texts of relevant announcements can be found at: