American Court Allows Chaparral Shareholder to Vote on Acquisition
On September 22, 2006, the Delaware Court of Chancery (USA) heard plaintiffs' motion for a preliminary injunction requesting that defendants Chaparral Resources, Inc. (Chaparral), the Special Committee of Chaparral, and LUKOIL Overseas, be enjoined from taking a vote of the Chaparral shareholders regarding LUKOIL Overseas' proposed acquisition of the Chaparral.
In support of their motion for preliminary injunction, plaintiffs argued that the disclosures in Chaparral's proxy materials were inadequate for the Chaparral's minority shareholders to vote on the proposed acquisition. Following oral argument, the Court denied plaintiffs' motion for a preliminary injunction, thereby allowing the shareholder vote to proceed on September 29, 2006. In reaching its decision, the Delaware Court of Chancery reasoned that plaintiffs failed to meet their burden under the law and held in favor of defendants.
The merger agreement between Chaparral and LUKOIL Overseas, which was executed on March 13, 2006, provides that LUKOIL Overseas will acquire all the outstanding shares of Chaparral at $5.80 per share. Since December 2005, LUKOIL Overseas has indirectly held 60% of Chaparral's common stock, following its acquisition of Nelson Resources Limited. Chaparral's remaining shares of common stock are held by a large number of minority shareholders and are traded in the over-the-counter market in the United States. LUKOIL Overseas' acquisition of Chaparral is expected to close before the end of this year. Akin Gump Strauss Hauer & Feld were the legal advisors for this transaction, and Aton Capital served as LUKOIL Overseas' financial advisor.
Andrey Kuzyaev, President of LUKOIL Overseas, said in connection with the ruling of the Delaware court: "We are pleased that the court carefully considered the arguments of the parties and it is our intention to close the deal even in the view of the sharp decline of the price of oil on the global market".
Chaparral Resources Inc. was incorporated in 1972 in the United States and operates solely in the Republic of Kazakhstan. Chaparral Resources and LUKOIL Overseas are co-owners of KarakudukMunai (KKM), a Kazakhstan joint stock company which holds the state license to develop the Karakuduk oil field. LUKOIL Overseas indirectly owns 76% of KKM.
The Karakuduk (Black Well) oil field, with the size of 68 square kilometers, was discovered in 1972. It is located in the Mangistau Region of Kazakhstan, 160 kilometers south of the Tengiz field and 365 kilometers northeast of the Region's administrative center, Aktau, where KKM's office is located. The development license was issued to KKM in 1995 for a period of 25 years. Development of the field was started in 2000. The field has over 70 development wells operating. In 2005 the field produced some 3.7 million barrels of oil (after deduction of royalties). The field's proved reserves total 50 million barrels of oil.
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