Acquisition

RNS Number : 9916N

Persian Gold PLC

22 June 2010

 



PERSIAN GOLD PLC

PROPOSED ACQUISITION OF HYDROCARBON EXPLORATION PLC

The board of Persian Gold plc ("Persian") is pleased to announce that it has entered into an implementation agreement whereby it has agreed to acquire all of the outstanding shares of Hydrocarbon Exploration plc ("HyEx") (the "Acquisition").  The Acquisition will be achieved by way of a scheme of arrangement (the "Scheme").   Persian has requested that dealings in its shares be immediately suspended from AIM pending publication of an admission document.

Details of the Acquisition

HyEx is a UK plc which was formed when Petrominerales Ltd ("Petrominerales"), a Latin American based oil exploration and production company listed on the Toronto Stock Exchange, acquired AIM listed Pan Andean Resources plc, and into which Pan Andean Resources plc transferred its non-Colombian and non-Peruvian assets.  On completion of the transaction, Persian will own 100 per cent. of the equity of HyEx, whose assets will be the exploration interests in Bolivia and Ghana and royalty income and licences over producing assets in the US. 

Persian has conditionally offered to buy all of the outstanding shares of HyEx from the existing shareholders of HyEx on the basis of 2,500 new shares of Persian for every one HyEx share held, subject to certain conditions, including Persian shareholder approval.  The conditions are set out in the summary of principal terms below. 

There are currently 25,537 HyEx shares in issue and 75,172,835 Persian shares in issue which would result in HyEx shareholders holding approximately 45.75 per cent. of Persian as enlarged by the Acquisition.  At the current Persian share price of 6.75p, this values HyEx at approximately £4.3 million. It is also anticipated that Persian will undertake a placing of new shares to raise sufficient working capital for the enlarged group.  As part of the arrangements described, the enlarged group will change its name to Clontarf Energy plc.

The Scheme is subject to regulatory and legal approvals, including approval by the High Court of England and Wales and approval of HyEx and Persian shareholders.  The final terms of the Offer will be set out in a circular expected to be posted to shareholders by the end of September 2010.  The transaction is expected to complete by the end of October 2010. 

Owing to HyEx's size, the Acquisition constitutes a reverse takeover of Persian under the AIM Rules and therefore a circular will be sent to Persian shareholders in due course to convene a general meeting to seek approval for the Acquisition.  

Background on HyEx

HyEx holds the assets of Pan Andean Resources plc which were not acquired by Petrominerales earlier this year, which are summarised as follows.  In the US, HyEx receives income from its royalty interests in Block High Island 52  and 63% working interest  in Block High Island 30L.in the Gulf of Mexico and small royalties from onshore holdings. Oil production from all of these assets is declining and is expected to be negligible within two years.  There is a claim against HyEx for circa $4 million from Hunt Oil, who operate High Island 30, which is disputed.

HyEx also has a 10% stake in the El Dorado gas field in Bolivia. El Dorado is a well located gas field with reserves of over 1 trillion cubic feet. It was a BP/Pan Andean joint venture. The BP stake is now owned by Chaco, the Bolivian state oil company, which is currently producing 20 million cubic feet of gas a day from two wells on the block.

HyEx holds a 30% interest in the Monteagudo gas/oil field (Repsol 50%, Petrobras 20%) in Central Bolivia. There is declining production from a number of shallow gas wells and a significant deep gas play.

HyEx is a participant in an oil exploration concession in Ghana, holding a 30 per cent. interest.  This is the same oil exploration concession in which Persian also have a 30 per cent. interest, as announced on 15 April 2010.

Related Party Transaction

The fact that four of the directors of Persian are also directors and/or shareholders of HyEx means that the Offer will constitute a related party transaction under the AIM Rules, requiring the remaining director, Dr Manouchehr Takin, following consultation with the Company's Nominated Adviser, Cairn Financial Advisers LLP, to consider whether the Acquisition is fair and reasonable insofar as the Persian shareholders are concerned, which he will do at the time of publication of the admission document.  The Acquisition is subject to such approval being granted.

Implementation Agreement

An implementation agreement setting out the terms and conditions of the Scheme has been entered into by Persian and HyEx. Amongst other things the agreement governs the relationship between Persian and HyEx during the period until the Scheme becomes effective.  A summary of the principal terms and conditions of the agreement is set out below.  The Offer, if made, will not fall under the UK takeover code or the equivalent takeover regulations in Ireland.

John Teeling, Chairman, commented:

"This is a good proposal for both companies and I strongly support it.  HyEx gets a stock exchange listing which gives liquidity to its shareholders and Persian Gold expands its oil and gas portfolio.  The increased scale will make the combined venture more acceptable to investors."

Contacts:

Persian Gold plc

John Teeling, Chairman                                      [phone]

James Finn, Finance Director                             [phone]

Nominated Adviser

Cairn Financial Advisers LLP                           [phone]

James Caithie                                                               

Broker and Financial Adviser

Alexander David Securities Limited                    [phone]

Ian Rice

College Hill                                                       [phone]

Nick Elwes

A summary of the principal terms and conditions of the implementation agreement is set out below:

Implementation of the Scheme is conditional upon (among other things):

·     Approval of Persian and HyEx shareholders

·     The sanction of the Scheme by the Court

·     Persian and HyEx obtaining all necessary consents and approvals to implement the acquisition contemplated by the Scheme

·     The warranties provided by HyEx and Persian pursuant to the implementation agreement being true and correct in all material respects at the effective date of the Scheme

·     The implementation agreement not having been terminated

·     Related Party Transaction approval (as set out above) having been granted

The parties are required to use reasonable endeavours to satisfy the conditions.

The implementation agreement can be terminated by either party by (among other things):

·     Mutual written consent of Persian and HyEx.

·     By either party if certain conditions set out in the implementation agreement are not fulfilled on or before 31 October 2010.

The implementation agreement contains customary non-solicitation provisions. 

HyEx must pay Persian a break fee of up to a maximum of £250,000 if the Scheme is not approved by the requisite majority of HyEx Shareholders or the Scheme is not sanctioned by the Court or the board of HyEx fail to make any of its recommendations, approvals, resolutions or determinations required in relation to the Scheme or withdraws, modifies or changes its recommendations, approvals, resolutions or determinations in a manner adverse to Persian.

HyEx must pay Persian a break fee of £450,000 if:

·           the board of HyEx fail to publicly reaffirm its recommendations of the Scheme;

·           the board of HyEx recommend the shareholders of HyEx vote for an offer by a third party;

·           the agreement is terminated  to permit  HyEx enter into an acquisition agreement with a third party; or

·           a third party proposal is announced or offered to shareholders of HyEx in advance of the meetings of the HyEx shareholders and they fail to approve the resolutions and the third party acquisition is completed within twelve months of such shareholder meetings.

Persian must pay HyEx an amount equal to HyEx's expenses directly relating to the Scheme to a maximum of £250,000 in the event HyEx terminates the implementation agreement following a failure by Persian to fulfil certain conditions relating to its obligation to implement the Scheme.

Representations and warranties have been given by each of Persian and HyEx including in relation to corporate capacity, authorisation and the accuracy of certain information provided to each party.

 

END

 

 

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