Proposal from Heamoor and Geo

RNS Number : 6231Z

Regal Petroleum PLC

18 January 2011

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.

REGAL PETROLEUM PLC

Proposal from Heamoor Limited ("Heamoor") and Geo-Alliance Oil-Gas Public Limited ("Geo-Alliance")

Regal Petroleum plc ("Regal" or the "Company") today provides an update with regard to the interest expressed by Heamoor in its announcement of 13 December 2010, and a potential alternative proposal to the recommended cash offer made by Energees Management Limited ("Energees") at a price of 24 pence per Regal share (the "Energees Offer").  An offer document was posted to Regal shareholders by Energees on 22 December 2010 and the first closing date of the Energees Offer is 1.00 p.m. (London time) on 24 January 2011.

The board of directors of Regal (the "Board of Regal") is committed to maximising value for all Regal shareholders, and as such has continued to explore viable alternatives to the Energees Offer as they arise.

Accordingly, the Board of Regal has been discussing an alternative structure with Heamoor, Geo-Alliance and their advisers (the "Geo-Alliance Proposal"), and today provides an update as to the status of such discussions.  Regal shareholders should note that there can be no guarantee at this point in time that the Geo-Alliance Proposal will ultimately be put to Regal shareholders.

Both Heamoor and Geo-Alliance are companies incorporated in Cyprus with all their issued and outstanding shares currently held by several discretionary trusts, the beneficiaries of which are Mr. Victor Pinchuk and his family members.  Heamoor is involved in various financing activities and Geo-Alliance is a leading private oil and gas producer in Ukraine, further details of which are set out below.

Details of the Geo-Alliance Proposal

Subject, inter alia, to due diligence by Regal and the signing of a binding sale and purchase agreement, the Geo-Alliance Proposal is comprised of two alternative elements as follows:

a) Proposed reverse take-over of Geo-Alliance with an option for Regal shareholders to sell their Regal shares to Heamoor at a price of 25 pence per Regal share for three months following completion of the reverse take-over (the "Acquisition"):

·    Regal would acquire the entire issued share capital of Geo-Alliance, in consideration for the issue of new ordinary shares in Regal to the shareholders of Geo-Alliance, representing not more than 70.0 per cent. of Regal's fully diluted share capital, as enlarged by the Acquisition;

·    the Acquisition would represent a reverse take-over under the AIM Rules for Companies, and as such would be conditional, inter alia, on the publication of an AIM Admission Document and the approval of Regal shareholders;

·    the shareholders of both Heamoor and Geo-Alliance have committed to provide an unsecured facility to the enlarged Company in conjunction with the Acquisition in order to ensure that the enlarged Company has sufficient working capital to meet its ongoing funding requirements and to fund the desired capex programme; and

·    following completion of the reverse take-over, Regal shareholders (excluding the shareholders of Geo-Alliance) would have the option to sell their Regal shares to Heamoor for a period of three months at a price of 25 pence per Regal share.  This purchasing commitment by Heamoor would be structured by way of a cash offer pursuant to Rule 2.5 of the Takeover Code (the "Code"), subject to a pre-condition that the proposed acquisition of Geo-Alliance by Regal completes, but which would not otherwise be subject to any conditions (including any minimum acceptance condition).

b) Proposed alternative pre-conditional cash offer:

In the event that either of the following does not occur by a long-stop date to be agreed:

·    the necessary approvals to implement the Acquisition being given by the Regal shareholders in a general meeting of the Company; and/ or

·    admission of the Company's enlarged share capital to trading on the AIM market operated by the London Stock Exchange plc ("AIM");

Heamoor or Geo-Alliance would make a cash offer to acquire the entire issued, and to be issued, share capital of Regal at a price of 25 pence per Regal share (the "Geo-Alliance Pre-conditional Cash Offer").

The Geo-Alliance Pre-conditional Cash Offer would be announced under Rule 2.5 of the Code, simultaneously with the announcement of the Acquisition, and would be subject to terms and conditions materially similar to those contained in the Energees Offer, save in respect of the acceptance condition which would be set at 50 per cent. plus one Regal share.

Obtaining the necessary Ukrainian anti-trust approvals would be a condition to both the Acquisition and the Geo-Alliance Pre-conditional Cash Offer.

For the avoidance of doubt, it is envisaged that any formal, binding announcement from Heamoor and/or Geo-Alliance would include both the Acquisition and the Geo-Alliance Pre-conditional Cash Offer.

Heamoor has confirmed to the Board of Regal that it has deposited funds with its financial adviser which are sufficient to meet the full consideration payable under the purchasing commitment made in connection with the Acquisition or under the Geo-Alliance Pre-conditional Cash Offer.

Expected timetable of events:

It is currently anticipated that the announcement containing the full terms of the Acquisition and the Geo-Alliance Pre-Conditional Cash Offer would be made as soon as reasonably practicable but no later than 10 February 2011, and that all required documentation relating to the Geo-Alliance Proposal would be posted to Regal shareholders as soon as reasonably practicable but no later than 10 March 2011.

Information on Geo-Alliance:

Geo-Alliance is a company incorporated in Cyprus with all of its issued and outstanding shares currently held by several discretionary trusts, the beneficiaries of which are Mr Victor Pinchuk and his family members.  Geo-Alliance is a leading private oil and gas producer in Ukraine and engages in the exploration, development, production and sale of natural gas, gas condensate and crude oil in Ukraine.

Geo-Alliance's assets comprise 16 permit areas covering 16 fields with a combined area of approximately 1,090 km2, of which 15 fields are located in the Dnipro-Donets basin. The region benefits from well developed gas transportation infrastructure.  Main pipelines are located in close proximity to Geo-Alliance's fields thus optimising the distribution process.  As of 30th June 2010, Geo-Alliance operated seven wells on four fields and had one well under construction. Geo-Alliance also owns 49 kilometres of pipeline connecting its producing wells to gas treatment facilities and to the Ukrainian gas transmission network. Geo-Alliance operates two new gas treatment and storage facilities, which were commissioned in 2007- 2008.

Further information relating to Geo-Alliance can be found at the following web site address - www.geo-alliance.com.ua.  Geo-Alliance also published a prospectus on 18 November 2010 in relation to its withdrawn flotation on the Warsaw Stock Exchange (the "Geo-Alliance Prospectus"). The Geo-Alliance Prospectus was published in accordance with the Prospectus Directive and made available on the website of the Cyprus Securities and Exchange Commission.

Recommendation

The Board of Regal is engaged with Heamoor and Geo-Alliance with the goal of securing for Regal shareholders a superior offer to the Energees Offer.

However, there can be no guarantee that any such offer or proposal from Heamoor and/or Geo-Alliance will ultimately be put to Regal shareholders, given the complex nature of the proposed Acquisition, due diligence and documentary requirements for a reverse take-over and re-admission of the enlarged group to trading on AIM, within the timetable requirements of the Code.  Furthermore, the Board of Regal notes that its due diligence of Geo-Alliance (including the review of a proposed combined business plan, key commercial assumptions and required funding for the enlarged group) is currently at an early stage and, therefore, the Board of Regal is not in a position to comment on the proposed terms of the Acquisition until due diligence is completed.

Accordingly, the Board of Regal continues to recommend the Energees Offer until such time as a superior firm offer is put forward to Regal shareholders.

In addition, Regal shareholders should be aware that there can be no certainty that the Energees Offer will remain open and capable of acceptance after 1.00 p.m. (London time) on 24 January 2011. Furthermore, Energees will be under no obligation to extend the Energees Offer beyond this closing date unless the Energees Offer becomes unconditional as to acceptances.  If the Energees Offer lapses and the Geo Alliance Proposal does not result in a firm proposal put to Regal shareholders, the Regal share price may be adversely impacted and any associated bid premium available to Regal shareholders through the Energees Offer may be lost.

Suspension of trading on AIM

As this announcement concerns a potential reverse take-over of Regal, in accordance with AIM Rule 14, the Regal shares will be suspended from trading on AIM until the earlier of the AIM Admission Document being published or the Acquisition no longer being pursued.  Nonetheless, given the impending closing date of the Energees Offer, the Board of Regal believes it is in the best interests of Regal shareholders to appraise them of the continuing discussions with Geo-Alliance and Heamoor.

Further announcements will be made in due course.

This announcement is being made with the consent of Heamoor and Geo-Alliance in accordance with Rule 2.4(c) of the Code.

The information relating to Geo-Alliance which appears in this announcement has been extracted from the information available on the Geo-Alliance website.

Enquiries:

Regal Petroleum plc Robert Wilde, Finance Director	Tel: [phone]
Bank of America Merrill Lynch Anya Weaving Paul Frankfurt	Tel: [phone]
Strand Hanson Limited (Nominated Adviser) Simon Raggett Rory Murphy	Tel: [phone]
Citigate Dewe Rogerson Martin Jackson George Cazenove	Tel: [phone]

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on [phone].

 

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