abarrelfull wrote on 26 Aug 2011 09:23
Tags: deals europe realm san-leon shale
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San Leon Energy plc (“San Leon” or the “Company”; AIM:SLE) and Realm Energy International Corporation (“Realm”; TSXV:RLM) are pleased to announce that they have entered into an agreement (the ”Arrangement Agreement”) pursuant to which San Leon will acquire all of the issued and outstanding shares of Realm (the “Acquisition”).
Pursuant to the Acquisition, each Realm shareholder will receive, for each Realm share, at such shareholder’s election: i) C$1.30 in cash; or ii) 3.30 ordinary shares in the capital of San Leon (or the same number of exchangeable shares of an indirect Canadian subsidiary of San Leon exchangeable on a one-for-one basis directly for ordinary shares in the capital of San Leon, subject to adjustment); or iii) a combination thereof; subject to a maximum of C$17.7 million in cash (subject to adjustment) being paid to Realm shareholders in aggregate. The Acquisition will be implemented by means of a Canadian plan of arrangement and result in Realm becoming an indirect subsidiary of San Leon, with closing expected in November 2011.
The terms of the Acquisition value Realm at approximately C$1.30 per share, based on the San Leon volume-weighted average price (“VWAP”) for the 60 trading days prior to and including 25 August 2011 of 25 pence per share and a Canadian Dollar per British Pound exchange rate of 1.603. Up to approximately 481 million newly issued San Leon shares are expected to be issued to Realm shareholders (assuming that such shareholders elect to receive the consideration payable to them fully in new San Leon shares).
The Board of Directors of each of San Leon and Realm have unanimously approved the Acquisition. The Board of Directors of Realm has received the opinion of its financial advisors that the consideration to be received pursuant to the Acquisition is fair, from a financial point of view, to Realm shareholders and has resolved to recommend that Realm shareholders vote in favour of the Acquisition.
The directors and officers of Realm, corporations controlled by them and certain other significant shareholders of Realm, together holding or controlling an aggregate of 40,912,276 Realm shares (being more than 37.7% of the issued Realm shares) have agreed to vote in favour of the Acquisition.
Acquisition Rationale
The Board of Directors of San Leon believes that the acquisition of Realm has significant commercial logic and would bring together two complementary portfolios to create a focused and large shale acreage position in Poland’s Baltic Basin. It is expected that the enlarged group will benefit from its combined operational and technical expertise as well as in-country experience in order to accelerate work programmes and de-risk the acreage. The combined position in Poland is also expected to provide cost synergies for the aforementioned work programmes.
This increased focus on shale may be further enhanced through the addition of any successful licence applications that Realm has submitted in Spain and France. To complement this large shale acreage position and associated work programmes, San Leon expects to continue to develop its conventional acreage in Poland, Albania, Morocco and Ireland in order to seek to build reserves, produce near-term cash flow and provide funding for work programmes going forward. The Board of Directors of San Leon believes that the enlarged group will be well capitalised to carry out its existing licence obligations through the addition of approximately C$24 million of cash currently on Realm’s balance sheet.
The enlarged company will hold 28 concessions and licences in seven countries, with a continued focus on Poland, Morocco and Albania. San Leon is currently undertaking an extensive exploration programme and expects to drill 16 wells over the next twelve months.
The Board of Directors of San Leon believes that the combination of San Leon and Realm presents a unique opportunity to create significant value for shareholders in both companies.
The benefits of the Acquisition for Realm shareholders include:
• The implied value of the Acquisition is approximately C$1.30 per Realm share .
o a premium of 46.1% to the current share price of Realm;
o a premium of 116.7% to Realm's closing share price the day prior to San Leon’s first approach to Realm’s Board ; and
o a premium of 136.4% to Realm's closing share price the day prior to the announcement of the initiation of a strategic review of Realm's Polish interests .
• The Acquisition will result in Realm shareholders owning approximately 36.9% of the enlarged entity , assuming that all shareholders elect to receive the consideration payable to them fully in new San Leon shares and all of the issued and outstanding options and warrants to acquire Realm shares are exercised.
• The exchangeable shares offer certain Realm shareholders who are residents of Canada for the purposes of the Income Tax Act (Canada) the opportunity to obtain a full or partial deferral of taxable capital gains for Canadian federal income tax purposes in certain circumstances.
• The ability to receive, at the election of Realm shareholders, San Leon shares or exchangeable shares gives Realm shareholders the opportunity to continue to participate in the future growth of the development of the Realm assets through an entity with cost and operational synergies.
• The Arrangement Agreement provides that Realm shareholders will have the right to dissent from participating in the Acquisition and to elect to receive a fair value payment for their shares from Realm post-closing.
Acquisition Highlights
The Board of Directors of San Leon believes that the combination of San Leon and Realm will:
• strengthen San Leon’s focus and position as one of the leading shale players in Poland;
• materially increase San Leon’s acreage in Poland’s Baltic Basin;
• leverage San Leon’s in-country technical team to add material value to Realm’s assets;
• have the potential to add further shale acreage to the portfolio through any successful licence applications that Realm has made in Spain and France; and,
• provide cost and operational synergies for upcoming seismic and drilling programmes.
San Leon will acquire the following:
• 4 exploration licences across Poland and Germany;
• 10 licence applications in Spain and 10 licence applications in France;
• >2.4 million gross acres under application in France and >2.0 million gross acres under application in Spain; and,
• approximately C$24 million of cash currently on Realm’s balance sheet.