Proposal by Noreco to merge Noreco and Det norske oljeselskap
Norwegian Energy Company ASA (Noreco - OSE:NOR), has today proposed to Det norske oljeselskap ASA (Det norske - OSE:DETNOR) a combination of the two companies through a share-for-share merger. The proposed exchange ratio is 2.44918 Noreco shares per each Det norske share, implying a 52.5% ownership in the combined company for Det norske shareholders. Noreco's proposal gives a 9.3 % premium to the 6 months volume weighted average trading prices. Noreco believes the proposed terms to be fair and balanced, and is looking forward to discussions with Det norske.
Noreco has over the last few months considered the possibility of a
combination with the Det norske. Noreco acknowledges that new
directors and a new board in Det norske were appointed yesterday.
Based on industrial considerations and with due regard to the
companies' employees, it is however Noreco's view that it is in both
companies' interests to as quickly as possible evaluate whether there
is basis for a potential combination. Noreco has therefore found it
appropriate and necessary to present the proposal now, also to avoid
further market speculation.
Noreco firmly believes that a combination will serve the interest of
all shareholders and employees of both companies, and it is Norecos
impression that there is broad shareholder support for a merger.
Compelling industrial logic
Combining Noreco and Det norske will create the largest independent
E&P company on Oslo Børs. The combined company will have a strong
portfolio of producing fields, discoveries and exploration licenses
in Norway, Denmark and the UK. The combined production from 10 fields
is approximately 18 000 barrels of oil equivalents per day. A total
of 25 discoveries will create significant value, and there is
extensive exploration upside from drilling the best prospects in the
combined exploration portfolio. The combined company will have a very
strong team of oil and gas professionals to create shareholder value
from the large asset portfolio.
Strong financial logic
The combined company will be exceptionally well equipped to meet the
challenges in the financial market, with high cash flow from
production and a strong balance sheet. The combined company will have
a market capitalization in excess of NOK 4 billion based on current
market prices and no need for additional equity funding for the
contemplated investment program. It will have a size to attract a
broader shareholder base, and be well positioned to exploit new
opportunities and to play an active role in the future consolidation
in the North Sea region. Further, the company will be in a better
position to progress discoveries to production within Norway. The
transaction creates value at today's oil prices, and the company will
have significant exposure to an upswing in the oil price.
Broad support
Noreco acknowledges, that based on the industrial and financial logic
and the proposed strategy, there seem to be broad shareholder support
for a combination of Noreco and Det norske.
Main terms proposed
Having thoroughly reviewed the rationales of a merger with Det
norske, Noreco strongly believes that a combination will create
significant shareholder value. Noreco is of the opinion that the
proposal put forward is fair and balanced for shareholders of both
companies. Det norske's shareholders are offered a premium to 3 and 6
months volume weighted average trading prices (VWAP).
Noreco's merger proposal includes the following main terms:
* Strategy:
The strategy for the combined company will be to build a leading,
full cycle E&P company in the North Sea region. The company will
continue to grow production, and will focus exploration and
development activities on material assets delivering sustained
growth. The asset portfolio will be actively managed through
acquisitions and divestments, and further consolidation in the
industry will be pursued in order to create and maximize shareholder
value.
* Exchange Ratio:
Based on recent trading prices, third party valuations and analyst
estimates, financial modelling and assessment of underlying assets,
Noreco proposes an exchange ratio and merger consideration of 2.44918
Noreco shares per each Det norske share, implying a 52.5% ownership
in the combined company for Det norske's shareholders.
The proposed exchange ratio represents a premium in favour of
shareholders in Det norske of 2.2% over 3 months VWAP and 9.3% over 6
months VWAP. In Noreco's opinion, the proposed exchange ratio is
strongly supported by underlying values and financial modeling of the
companies which has also taken into account the difference in capital
structures. Third party valuations and analysts' estimates also
strongly support the assessment of underlying values on which the
exchange ratio has been based.
* Board of Directors:
To be nominated by the companies' respective nomination committees
jointly.
* Executive Management:
Noreco to nominate the CEO and Det norske to nominate the COO.
* Employees and Locations:
The merger would be a merger for growth, with an aim and ambition to
keep and retain the companies' combined human capital going forward.
The combined company will maintain offices in Stavanger, Trondheim,
Oslo, Harstad and Copenhagen.
* Structure:
The combination will be structured as a legal merger (share for
share, with no cash consideration) pursuant to the Public Limited
Companies Act, to be approved by the companies' respective general
meetings with 2/3 majority. The combination will not involve any need
for additional fundraising.
Noreco currently awaits Det norske's response to the proposal, and
looks forward to discussions with Det norske's Board of Directors in
due course. It is Noreco's ambition that, should Det norske share
Noreco's views on the rationale of a combination, the two Boards of
Directors can soon reach a mutually acceptable merger plan to be
presented to the respective shareholders of the companies for
approval. Following successful agreement on a merger plan, both
companies will need to call for an Extraordinary General Meeting to
approve the merger (2/3 majority required). The merger plan will be
distributed to the shareholders of both companies no later than one
month prior to such meetings. A joint information memorandum will
also be prepared. Provided the merger is approved by the
Extraordinary General Meetings of both companies, the merger can be
expected completed following a statutory two month creditor notice
period. Should a mutually agreed merger plan be in place by the end
of February, completion of a merger (subject to shareholder approval)
could be expected within the end of Q2 2009.
Press conference
Noreco will hold a press conference today at 11:00 CET at Noreco's
offices in Stavanger, where the merger proposal will be presented by
CEO Mr Scott Kerr and the Chairman Mr. Lars Takla. The presentation
can also be followed by web cast on Noreco's web page www.noreco.com,
both live and in an archived version.
Conference call
Noreco will further host an analyst conference call with
possibilities for questions and answers today at 14:00 CET. To join
the conference please call 800 888 60 for participants in Norway or
+47 23 10 93 50 for participants outside Norway (pin code: 943705).
Pareto Securities AS is acting as financial advisor to Noreco.
Advokatfirmaet Schjødt DA and Arntzen de Besche Advokatfirma AS are
acting as legal advisors.
Stavanger, 3 February 2009
The Board of Directors of Norwegian Energy Company ASA
Further information
For further information, please contact:
Press contact:
Lars Takla, Chairman of the Board (+47 992 83 851)
Scott Kerr, Chief Executive Officer (+47 992 83 890)
Investor contact:
Einar Gjelsvik, Vice President Investor Relations (+47 992 83 856)
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