The boards of Seplat Petroleum Development Company Plc and Eland Oil and Gas Plc on Tuesday October 15, 2019, announced to the market 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. The Acquisition is to be effected by means of a scheme of arrangement under Part 26 of the Companies Act.
Under the terms of the acquisition, each Eland shareholder will be entitled to receive, for each Eland Share 166 pence in cash. The Acquisition values the entire issued and to be issued ordinary share capital of Eland at approximately £382 million on a fully diluted basis, and represents: a premium of approximately 28.5 per cent. to the Closing Price per Eland Share of 129.2 pence on 14 October 2019 (being the latest practicable date prior to this Announcement); a premium of approximately 32.6 per cent. to the three-month volume weighted average price per Eland Share as of 14 October 2019 of 125.2 pence; and a premium of approximately 32.7 per cent. to the six-month volume weighted average price per Eland Share as of 14 October 2019 of 125.1 pence.
In addition, Eland Shareholders on the register at the close of business on 18 October 2019 will be entitled to receive and retain the interim dividend of 1 pence per Eland Share to be paid on 31 October 2019.
The Eland Directors, who have been so advised by Evercore as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Eland Directors, Evercore has taken into account the commercial assessments of the Eland Directors. Evercore is providing independent financial advice to the Eland Directors for the purposes of Rule 3 of the Code.
Accordingly, the Eland Directors unanimously intend to recommend that Eland Shareholders vote in favour of: (i) the Scheme at the Court Meeting; and (ii) the Resolution at the General Meeting, in each case as the Eland Directors who are interested in Eland Shares have irrevocably undertaken to do in respect of those Eland Shares in respect of which they are able to control the exercise of voting rights, amounting in aggregate to 609,657 Eland Shares and representing approximately 0.28 per cent. of the issued share capital of Eland.
Seplat has also received irrevocable undertakings from Helios Natural Resources Limited (“Helios”), Lombard Odier Asset Management (Europe) Limited (“LOAME”) and Richard I Griffiths 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 in respect of a total of 129,118,048 Eland Shares, representing approximately 59.89 per cent. of the existing issued ordinary share capital of Eland.
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.
Seplat is a leading independent oil and natural gas producer in the Niger Delta area of Nigeria, and a leading supplier of processed natural gas to the domestic market, fully listed on both the Nigerian Stock Exchange and the London Stock Exchange since April 2014. As a full cycle upstream oil and gas exploration and production company, Seplat’s focus is on maximising hydrocarbon production and recovery from existing production and development assets, realising the upside potential within the portfolio through focused appraisal and exploration activities and farm-in into new opportunities in Nigeria. Seplat’s existing portfolio comprises of direct interests in five blocks in the Niger Delta area and a revenue interest in an additional block.
Eland is an independent oil and gas company focused on production, development and exploration in West Africa, particularly the Niger Delta region of Nigeria. Eland was founded in 2009 with a strategy to deliver exceptional shareholder returns through a combination of development, production growth and exploration success. In 2012 Eland, through its joint venture company, Elcrest, purchased a 45 per cent. Interest in OML 40 and in 2014 acquired a 40 per cent. Stake in a second licence, Ubima. Led by its experienced senior management and operating team, the Eland Group took gross production on OML 40 from 3,338bopd average daily production for producing days in 2014 to a peak 2018 production rate of over 31,000bopd, an increase of over 800 per cent. Eland’s headquarters are in Aberdeen, with additional offices in London, Lagos, Benin City and Abuja.
The cash consideration payable under the Acquisition is being wholly funded through a combination of existing cash resources of Seplat and a new loan facility available to Seplat. In accordance with Rule 2.7(d) of the Code, Citi, as sole financial adviser to Seplat, is satisfied that sufficient resources are available to Seplat to satisfy in full the cash consideration payable to Eland Shareholders under the terms of the Acquisition.
The Acquisition will be put to Eland Shareholders at the Court Meeting and at the General Meeting. In order to become Effective, the Scheme must be approved by a majority in number of the Eland Shareholders voting at the Court Meeting, either in person or by proxy, representing at least 75 per cent. In value of the Eland Shares voted. In addition, a special resolution, to deal with certain matters ancillary to the Scheme, must be passed by Eland Shareholders representing at least 75 per cent. of the votes cast at the General Meeting. Subject to, among other things, the satisfaction or the waiver of the Conditions, the scheme is expected to become Effective in late 2019. The Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and the General Meeting, will be published as soon as practicable and, in any event, within 28 days of this Announcement.
Commenting on the Acquisition, George Maxwell, CEO of Eland, said: “This recommended offer from Seplat represents the culmination of a very successful journey by Eland, the management team and all of its stakeholders. Since founding Eland, we have, jointly with our partners in Elcrest, acquired our interests in OML 40, a non-producing asset, achieved an all-time record production on this asset and become a significant independent producer in Nigeria’s E&P landscape and one of the biggest oil producers on London’s AIM market.
Eland has, in a period which has seen a significant cyclical downturn in our industry, outperformed most of its peers and the AIM Oil & Gas Index. This transaction represents a record share price for Eland and crystallises Eland’s stated goal to maximise shareholder value.”
Russell Harvey, Chairman of Eland, commented: “We are pleased to announce this recommended Acquisition by Seplat. Eland’s management team has done an excellent job executing our strategy. We have demonstrated a strong track record of operational delivery and value creation in Nigeria from our high-quality assets. This offer allows Eland Shareholders to benefit from an accelerated and enhanced realisation of this value through a cash offer at a significant premium to the current market value. In addition, the business will benefit from the opportunity to become part of a more significant player in the Nigerian oil and gas market. For these reasons, the Eland Board unanimously intends to recommend the offer to Eland Shareholders.”
Commenting on the Acquisition, Dr. Bryant Orjiako, Chairman of Seplat, said: “Since Seplat acquired its first blocks and commenced production in 2010, we have increased oil and gas production and grown reserves in each year of operation, delivering significant growth and value for our shareholders. We firmly believe that Eland is a complementary fit with Seplat and that there will be enhanced scale and a wider range of capabilities made available to the enlarged group through the combination. This acquisition signals the next step in our journey that will underpin Seplat’s ambition to be the leading independent E&P in Nigeria.”
Austin Avuru, CEO of Seplat, commented: “We are pleased to have reached an agreement to acquire Eland and its portfolio of assets that will enhance our existing operations. Eland is an excellent fit with Seplat and the combination should achieve for us growth and increased profitability, creating value for our shareholders, employees and other stakeholders while offering an attractive upfront premium to Eland Shareholders. The Acquisition, made possible by our robust operational platform and headroom in our capital structure, is in line with a key part of our established strategy which is to pursue opportunities in the onshore and offshore areas of Nigeria that offer near term production with cash flow and reserves potential. The Acquisition reinforces Seplat’s status as one of Nigeria’s leading indigenous, independent E&Ps and will create a Nigerian E&P champion with the footprint and technical capabilities to further grow and consolidate in Nigeria.”
This Summary should be read in conjunction with, and is subject to, the full text of this Announcement. The Acquisition will be subject to the Conditions and further terms set out in Appendix I to this Announcement and to the full terms and conditions which will be set out in the Scheme Document. Appendix II to this Announcement contains the sources and bases of certain information contained in this Announcement, Appendix III contains a summary of the irrevocable undertakings received in relation to the Acquisition and Appendix IV contains definitions of certain expressions used in the Summary and in this Announcement.
