The Offer consideration will be seven (7) newly-issued shares of Magellan common stock for each ten (10) outstanding MPAL shares. If the Offer is successful, new Magellan shares will be issued to MPAL's Australian shareholders in the form of CDIs (CHESS Depository Interests), which will be listed on the Australian Stock Exchange ("ASX").
Based on Magellan's closing share price of US$1.93 on October 17, 2005 on the NASDAQ Capital Market and an A$/US$ exchange rate of 0.75, the Offer values MPAL at A$84.1 million in total (including the shares currently owned by Magellan), or A$1.80 per share. Accordingly, the proposed consideration in aggregate for the 44.87% of MPAL's shares which Magellan does not already own is approximately 14.7 million Magellan shares, with an aggregate value of A$37.7 million based on the above.
Magellan has retained TM Capital Corp. of New York, N.Y. and Baron Partners Limited of Sydney, Australia to serve as its financial advisers in relation to the Offer.
The Offer consideration exceeds the highest price at which MPAL shares have traded since January 2003 and represents a premium of:
* approximately 28% to MPAL's volume weighted average price of A$1.41 in the 3-month period prior to this announcement; and * approximately 33% to MPAL's closing share price of A$1.35 on October 18, 2005.
Following successful completion of the Offer and the compulsory acquisition, non-Magellan shareholders of MPAL would collectively own approximately 36.3% of Magellan's issued and outstanding shares.
Offer Timing & Conditions
Magellan intends, as soon as practicable, to file with the U.S. Securities and Exchange Commission a Registration Statement on Form S-4, which will contain a prospectus/proxy statement in connection with the proposed Offer.
A Bidder's Statement will be filed with ASX and the Australian Securities and Investments Commission as soon as practicable. A copy of the Bidder's Statement will also be posted to MPAL shareholders and made available on Magellan's website. at: www.magpet.com.
Magellan anticipates that the Offer will remain open for a minimum of eight (8) weeks after the dispatch of the Bidder's Statement to MPAL's shareholders.
The Offer will be subject to certain conditions including Magellan acquiring at least 90% of MPAL's outstanding shares on or before the end of the prescribed Offer Period, and approval of the issuance of Magellan common stock in the Offer by Magellan's shareholders at the upcoming 2005 annual meeting of shareholders. Other conditions to the Offer are more fully described in the attached Schedule A.
Benefits to MPAL Shareholders
Magellan believes that the benefits of the Offer for MPAL and its shareholders are numerous. While retaining an interest in the underlying MPAL assets and business prospects, MPAL shareholders will enjoy the following benefits:
* a value premium of 28% on MPAL's volume weighted average trading price on the ASX for the last 3 months; * shares in a more liquid security with significantly higher average trading volumes; * potentially cheaper access to capital; * potential cost savings from organisational efficiencies arising from the simplified capital structure; * tax roll-over relief under Australian law; and * full alignment of the strategies of both companies.
Magellan's Chairman, Mr. Walter McCann, said: "We believe that the current shareholding structure of MPAL is not necessarily in the best interests of either Magellan or MPAL shareholders. We also believe that the existing ownership structure has not provided optimal benefits in transparency as to pricing or market understanding of MPAL's assets nor fostered liquidity or access to capital in either the United States or Australia. We believe that a successful takeover will lead to a stronger company which will be better positioned to thrive in the current competitive atmosphere and to improve overall shareholder returns."
Magellan's Intentions if the Offer is Successful
It is Magellan's present intention, following the completion of the Offer, to maintain the current board of directors of MPAL and to own 100% of MPAL's outstanding shares.
Magellan's specific intentions for the near term future of MPAL will be described in Magellan's relevant U.S. and Australian regulatory filings. In summary, Magellan envisages the following with respect to the continuation of the business, the position of the employees and the protection of MPAL's assets:
* Business: Magellan expects MPAL to continue as an oil and gas exploration and production company in substantially the same manner as it is presently operated. * Board of Directors and Executive Management: Magellan will maintain the current board of directors. Magellan will also seek to retain key members of the MPAL executive management team, whose performance will continue to be reviewed in line with current procedures. Additional members of the executive management team will be added, as appropriate. * Employees and Consultants: Magellan intends to continue the monitoring and review process which is currently in place in regard to MPAL's employees and the usage of consultancy services. * Headquarters: MPAL, as a wholly-owned subsidiary of Magellan, will continue to be headquartered in Brisbane. Magellan's headquarters will continue to be based in Hartford, Connecticut, USA. * MPAL Business Policies and Practices: Consistent with Magellan's enhanced ownership position, Magellan intends to continue to review MPAL's important business policies and practices, including corporate governance, exploration and development efforts, capital expenditures, existing and planned joint ventures, acquisition prospects, and investment policies, with the aim to maximise overall shareholder return. * Strategic Initiatives: Magellan intends to continue to review strategic options in light of the new ownership structure, in cooperation with the MPAL Board, its executive management, and taking into account the strategic review undertaken by MPAL's Business Development Committee. * Cash Resources: Magellan believes that MPAL's existing cash resources are currently sufficient to continue its business without a major effort to raise additional capital. * Other Actions: Magellan intends to undertake all other actions consistent with Magellan's role and the interests of the combined companies and the shareholders. * Compulsory Acquisition: If the Offer is successful, Magellan will proceed with the compulsory acquisition of the remaining MPAL shares in accordance with the provisions of the Corporations Act. * Removal from Official List: Magellan intends to request ASX to remove MPAL from the Official List of the ASX following successful completion of the Offer.
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