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CALGARY and VANCOUVER, Feb. 6 /CNW/ - Stratic Energy Corporation (TSX-V: SE) ("Stratic") and Grove Energy Limited (TSX-V and AIM: GRV) ("Grove") announce that they have agreed to merge their respective businesses, subject to approval by Grove's shareholders and to certain other conditions. The combined company will be called Stratic Energy Corporation and its Chief Executive Officer will be Kevin Watts. Wolfgang Zimmer, Grove's current Chief Executive Officer will become President and Chief Operating Officer and will join the board of the combined company. Andrew Childs will also join the board as a non-executive director. Sir Graham Hearne will remain as Chairman. The proposed transaction has been approved by the boards of both Stratic Energy Corporation and Grove Energy Limited.
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 66 2/3% 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".
Corporate Governance
The board of the combined company will be comprised as follows:
Chairman: Sir Graham Hearne
Chief Executive: Kevin Watts
President and Chief Operating Officer: Wolfgang Zimmer
Non-Executive Director: Andrew Childs
Non-Executive Director: Peter Kingston
Non-Executive Director: Colin Orr-Ewing
Non-Executive Director: Hugh Ross
Non-Executive Director: John Weatherall
Following completion of the Proposed Transaction, Stratic intends to review its incentive and retention policies for employees and directors to ensure that the interests of all directors and employees are closely aligned with those of shareholders
Financial Advisors
Lazard & Co., Limited and GMP Securities L.P. are acting as financial advisors to Stratic and no one else in connection with the Proposed Transaction. GMP Securities L.P. has advised the Board of Directors of Stratic that it is of the opinion, subject to its review of the final form of the documents effecting the Proposed Transaction, that the Proposed Transaction is fair from a financial point of view for Stratic's shareholders.
Tristone Capital Inc. is acting as exclusive financial advisor to Grove in connection with the Proposed Transaction, and has advised the Board of Directors of Grove that it is of the opinion, subject to its review of the final form of the documents effecting the Proposed Transaction, that the consideration to be received by the Grove shareholders as a result of the completion of the Proposed Transaction is fair from a financial point of view for Grove's shareholders..
Forward-Looking Statements
Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to shareholder approval and TSX Venture Exchange acceptance. The Proposed Transaction cannot close until the required approvals are obtained. There can be no assurance that the Proposed Transaction will be completed as proposed, or at all.
Investors are cautioned that, except as disclosed in the information circular to be prepared in connection with the transaction, any information released or received with respect to the Agreement may not be accurate or complete and should not be relied upon. Trading in the securities of Stratic and Grove should be considered highly speculative.
The TSX Venture Exchange has neither approved nor disapproved of the information contained herein. No Canadian securities regulatory authority has expressed an opinion about the securities being offered. This press release is not an offer of securities for sale in the United States. The securities to be offered will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or applicable state securities laws, and may not be offered or sold in the United States absent registration under the Securities Act and applicable state securities laws or available exemptions from United States federal and state registration and qualification requirements.