Seplat Petroleum Development Plc announced earlier today that it will acquire Eland Oil & Gas, an independent exploration company that was founded in 2009 and “listed on AIM, the London Stock Exchange’s growth market.”
According to a statement signed by Seplat’s Company Secretary, Mrs Edith Onwuchekwa and issued to the Nigerian Stock Exchange, the development follows the finalisation of acquisition agreements between the boards of both companies.
“Seplat Petroleum Development Company Plc (“Seplat” or the “Company”), a leading Nigerian independent oil and gas company listed on both the Nigerian Stock Exchange and London Stock Exchange, today notifies that the Boards of Seplat and Eland are pleased to announce that they have reached agreement on the terms of a recommended cash acquisition of the entire issued and to be issued ordinary share capital of Eland by Seplat (the “Acquisition”).”
Terms of agreement: The statement by the Seplat further disclosed that the deal will be effected through a scheme of arrangement in accordance with Nigeria’s Companies Act; part 26. Further details are summarised below.
- Every Eland Oil & Gas shareholder will receive 166 pence in cash per share.
- The entire issued and yet to be issued ordinary share capital of Eland Oil & Gas has been valued at approximately £382 million.
- On a fully diluted basis, this represents a premium of 28.5% to Eland’s closing share price of 129.2 pence on 14 October 2019.
- It also represents “a premium of approximately 32.6% to the three-month volume-weighted average price per Eland Share as of 14 October 2019 of 125.2 pence.”
- Any shareholder of Eland Oil & Gas whose name appears on the register as at close of business on Friday, October 18th, will stand a chance of receiving and retaining the interim dividend which the company is set to pay on October 31st, 2019.
In the meantime, the board members of Eland Oil & Gas believe that terms of this scheme of arrangement are “fair and reasonable”. In view of this, the directors have urged the company’s shareholders to vote in favour of this scheme during a court-ordered meeting, the date for which was not disclosed in the press statement.
A done deal? Apparently, Eland’s board of directors signed an undertaking that makes this agreement binding. In other words, Seplat Petroleum received an irrevocable undertaking, not just from the board of Eland Oil & Gas, but also from other stakeholders such as Helios Natural Resources Limited, Lombard Odier Asset Management (Europe) Limited, and
Richard I Griffiths. These entities are to ensure that the scheme is voted through during the court-ordered meeting.
“Therefore, as at the date of this Announcement, Seplat has received irrevocable undertakings to vote, or procure the voting, to approve the Scheme at the Court Meeting and vote, or procure the voting, in favour of the Resolution at the General Meeting with respect to a total of 129,727,705 Eland Shares, representing approximately 60.17 per cent. of the existing issued ordinary share capital of Eland. Further details of the above-mentioned irrevocable undertakings are set out in Appendix III to this Announcement.”
Good for Seplat: With this acquisition, Seplat Petroleum Development Company Plc is positioning itself to become Nigeria’s biggest oil exploration and production company. The company has so far remained profitable this year, with half-year 2019 profit increasing 152.6% to N37.5 billion.
Seplat’s stock is currently trading at N490 on the Nigerian Stock Exchange. This is slightly below the opening share price of N517, indicating that investors may be reacting lukewarmly to this development. But there really is no reason for them to be worried, seeing as Eland’s acquisition is expected to boost Seplat’s production output to 64,000 barrels per day. Eland Oil & Gas’s main asset is the OML 40 license in the Niger Delta.