Stratic Energy Corporation also announces that it has entered into an agreement to raise, by way of a bought deal private placement financing, C$50,000,000 through the issue and sale of 37,037,037 common shares at a price of C$1.35 per share. The funds are being raised by a syndicate of underwriters led by GMP Securities L.P., and including Tristone Capital Inc., Westwind Partners Inc., Dundee Securities Corporation and Toll Cross Securities Inc. The net proceeds from the financing will be used to fund the development of the combined company's oil and natural gas development projects, including acquisitions, and for general working capital purposes. Half of the funds are being raised on a subscription receipts basis conditional on completion of the proposed merger between the two companies. Closing of the private placement is expected to occur on or about 6th March 2007 and is subject to the receipt of all necessary regulatory and stock exchange approvals. The common shares issued will be subject to a four-month hold period from that date.
The new business will own interests in development projects in its core areas of the Black Sea (offshore Turkey), the North Sea (UK and Netherlands sectors) and The Po Valley (onshore Italy). The company will also own longer term exploration acreage in Tunisia, Syria, Morocco, Slovenia and Romania, but intends to rationalize these areas over the balance of the current year. First production from the most advanced of the company's development projects in the Black Sea is expected to start within the current quarter, and other projects in the North Sea and Italy are expected to start producing in 2008.
To effect the merger, the two companies have entered into a pre-acquisition agreement (the "Arrangement Agreement") under which Stratic will acquire all of the issued and outstanding common shares of Grove on the basis of 0.61879 of a common share of Stratic for each common share of Grove (the "Proposed Transaction"). Based on the closing price of Stratic stock on 5th February 2007 of C$1.44, this ratio values Grove at C$123 million and each Grove share at C$0.89, and represents a premium over the closing price of Grove stock on that date of 13%. Upon completion of the Proposed Transaction, the combined company will have approximately 227.9 million common shares outstanding.
It is intended that Grove's existing listings on the TSX Group's Venture Exchange and the Alternative Investment Market of the London Stock Exchange ("AIM") will cease upon completion of the Proposed Transaction and that in due course applications will be made to list the combined company on the Toronto and London Stock Exchanges.
Shareholders of Grove will be asked to consider the Proposed Transaction at a special meeting of shareholders expected to be held in April. An information circular detailing the Proposed Transaction is anticipated to be mailed to Grove shareholders in early March 2007. Completion of the Proposed Transaction is subject to a number of conditions including acceptance by the TSX Venture Exchange, acceptance by at least 662/3% of Grove's shareholders, the approval of the Court of British Columbia and certain other regulatory agencies. The directors and officers of Grove have agreed to vote in favour of the Proposed Transaction in respect of their own shareholdings.
Grove has agreed not to directly or indirectly solicit or initiate any inquiries, discussions or negotiations with any third party with respect to any take-over proposal and has agreed to provide Stratic with the opportunity to match any competing offer. In addition, each of Grove and Stratic has agreed to pay a reciprocal non-completion fee of US$3 million to the other party in certain circumstances.
Kevin Watts, President and Chief Executive Officer of Stratic commented "I am delighted that we have the opportunity to combine the businesses of Stratic and Grove to form a stronger company with a core of near-term development projects, balanced with longer-term exploration acreage that is capable of creating significant value for shareholders. The complementary skills of the respective management and technical teams of the two companies will enhance the company's ability to pursue further wealth-creating opportunities as the junior oil sector continues to evolve."
Wolfgang Zimmer, Chief Executive Officer of Grove added "The two companies are already active in Italy and the North Sea and have a similar business philosophy of concentrating on lower risk development projects. The logic for combining the two businesses is compelling and I look forward to joining the Stratic team in continuing to build the combined business".
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