The combined entity is expected to have a fully diluted market capitalization of approximately Cdn$2.5 billion and will result in the formation of a world class diversified oil and gas producer, with an inventory of exploration upside opportunities.
Pacific Stratus shareholders will receive 8.85 common shares of Petro Rubiales for each share in Pacific Stratus. The holders of common share purchase warrants and options of Pacific Stratus will receive common share purchase warrants and options of Petro Rubiales, in amounts and at exercise prices to be based on the common share exchange ratio. The exchange ratio represents a market-to-market transaction based on the agreed 10, 15 and 20-day volume weighted average price of the two companies.
The transaction will require approval by 66 2/3% of Pacific Stratus shareholders voting and present at a special meeting of Pacific Stratus shareholders to be held in Toronto in early 2008 (exact date to be announced at a later date). Petro Rubiales' shares shall remain the same and no action is required by its shareholders. Completion of the transaction is subject to the satisfaction of certain conditions by both parties, including the completion of due diligence investigations. It is also subject to the execution of a definitive agreement and the approval of both the Toronto Stock Exchange and TSX Venture Exchange. It is anticipated that the transaction will be concluded in the first quarter of 2008. The agreement may be terminated if certain conditions are not met, but if a party terminates the agreement or fails to consummate the transaction or enters into an agreement with a third party, such party shall pay to the other a termination fee.
Upon completion of the transaction, the board of directors of the combined entity is expected to be Serafino Iacono (Co-Chairman), Miguel de la Campa (Co-Chairman), Ronald Pantin, Jose Francisco Arata, German Efromovich and Gordon Keep. In addition, a four person advisory board consisting of Augusto Lopez, Miguel Rodriguez, Jose Efromovich and John Zaozirny will also be appointed, with the expectation that the board of directors of Pacific Rubiales will be increased to ten at its next annual meeting, at which time these four individuals will be added to the board of directors.
The boards of directors of both Petro Rubiales and Pacific Stratus have unanimously approved the transaction. The recommendation of Petro Rubiales' board of directors is supported by a fairness opinion from its financial advisor, Endeavour Financial International Corporation, and that of Pacific Stratus's board of directors is supported by a fairness opinion from its financial advisor, GMP Securities L.P. As well, Orion Securities Inc. provided an additional fairness opinion to the board of Pacific Stratus.
Ronald Pantin, President and Chief Executive Officer of Petro Rubiales said, "This transaction is a merger of complementary companies that helps create one of the largest oil and gas production and development companies in Colombia. It provides an immediate increase in production to our shareholders and creates a diversified company with an exciting exploration portfolio."
Jose Francisco Arata, Chief Executive Officer of Pacific Stratus stated, "This transaction is very compelling in that it combines Pacific Stratus's very strong exploration team with an extremely competent production team from Petro Rubiales. Both companies hold a significant oil and gas exploration portfolio and the merger will allow them to leverage their strong operational and exploration expertise at their respective properties. The combined entity is well placed to become a significant factor in the Colombian and South American energy market."
Petro Rubiales and Pacific Stratus have an existing letter agreement whereby Pacific Stratus has the right to earn 50% of Petro Rubiales' interest in the Quifa Association Contract, while Petro Rubiales has the right to earn a 50% interest in Pacific Stratus' interest in the Arauca Technical Evaluation Agreement, both in Colombia.
Shareholders in Pacific Rubiales will own a unique company with:
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