Interactive Investor
The consideration represents a premium of 13.3% over the closing middle market price of 11p per Aurelian share on 9 November, the business day immediately prior to the date of the announcement.
Under the terms of the merger, Aurelian shareholders will be entitled to receive 1.3 new San Leon shares for each Aurelian share. Existing Aurelian shareholders will hold approximately 34% of the enlarged company, with the remaining 66% being held by existing San Leon shareholders.
Both San Leon and Aurelian hold “significant” acreage positions in Poland, and the merger will make the enlarged group the largest foreign acreage holder in that country. The companies stressed that the enlarged group offers near-term cash flow potential in Poland, while also possessing “high-impact growth potential in a well-balanced conventional and unconventional exploration portfolio, particularly in Poland, Morocco and Albania”.
The merger is conditional on certain approvals by Aurelian shareholders. The Aurelian board intends to unanimously recommend Aurelian shareholders vote in favour of the resolutions… It is currently expected that the scheme circular will be published later in November and subject to the satisfaction, the scheme will become effective and the merger completed in early 2013.
“The proposed merger between Aurelian and San Leon creates a leading upstream position in Poland with complementary play types, capabilities and relationships covering both conventional and unconventional resources,” stated Aurelian chief executive Rowen Bainbridge.
“The integration of Aurelian and San Leon’s Permian Basin assets and the combined conventional exploration portfolio elsewhere in Europe and North Africa offer a high-impact forward programme over the next 12 to 18 months. I believe the value proposition in the deal for shareholders is compelling.”
Oisin Fanning, executive chairman of San Leon, echoed this view: “A merger with Aurelian makes perfect sense for the shareholders of both companies. The combination of cash resources and the Polish asset base alone creates an obvious and exciting opportunity to realise substantial growth.
“Both management teams have built up a tremendous amount of experience and we can now employ that to pursue a best-of-portfolio near-term value creation strategy. The combined entity offers shareholders material conventional and unconventional plays in stable and highly import-dependent countries.”
Investor reaction
Investors didn’t seem too pleased with the news, with shares in San Leon dropping almost 15%, while Aurelian Oil and Gas slipped nearly 7%.
But there were also some optimistic Interactive Investor users on thediscussion boards. ‘Surrey_Hills’ explained: “Aurelian shareholders getting their stock converted into a portion of the LARGEST shale gas exploration acreage in Poland, which has a monster discovery at Siciny, where Aurelian’s cash will go a very, very long way indeed, very soon.
“San Leon Energy will also make Siekierki work. Aurelian benefits from a better brand and the a team with the resolve to get their core asset out of the ground. Aurelian shareholders now get a piece of the action in Ireland, Albania and Morocco.”
User ‘bonobo77’ added: “This is a very, very good deal for San Leon Energy in the med-long term, and [the share price] is only taking the short-term hit due to the arbitrage. [This] means Aurelian will remain a better buy until the merger completes.”
.
