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DNO International ASA, the Norwegian oil and gas company, announced that it intends to make an all-cash offer, through an acquisition entity, to acquire Calgary-based Calvalley Petroleum Inc. (Calvalley) at a price of CAD 2.30 per Class A common share. DNO International's offer represents a premium of approximately 60 percent to the CAD
1.43 closing price of Calvalley Shares on the Toronto Stock Exchange on 4 July 2012 and approximately 55 percent to the volume weighted average trading price of Calvalley’s Shares on the TSX for the past 30 trading days. The proposed transaction represents a market capitalization value of approximately CAD 215 million.
“This offer provides Calvalley shareholders with significant, immediate and certain value for the company’s existing assets, as well as recognizing its future growth potential,” said Bijan Mossavar-Rahmani, DNO International’s Executive Chairman. “We also believe our own shareholders and other stakeholders would be very well-served by the combination of these two businesses.” “For DNO International, this transaction is complementary to our existing Yemen asset base and fits well with our strategy of continuing to build a balanced portfolio of production, development and exploration assets in the Middle East and North Africa,” said Mr. Mossavar-Rahmani. “We believe the combination of Calvalley’s portfolio and DNO International’s operational capabilities and strong balance sheet position us to enhance value in Yemen through increased production and reserves.”
Calvalley's principal assets and operations relate to its 50 percent working interest in the Production Sharing Agreement for Block 9, which consists of a 2,234 square kilometre (552,000 acre) area within the prolific Sayun-Masila Basin in the Republic of Yemen. Calvalley also owns a 100 percent working interest in a Production Sharing Contract in the Republic of Ethiopia for the Metema and Gimbi blocks covering a total area of 46,470 square
kilometres (11.5 million acres).
DNO International currently holds working interests in five assets in Yemen, three of which are in production with Company Working Interest of 4,169 barrels of oil per day (bopd) in Q1 2012 (approximately 10 percent of DNO International’s production) and proved plus probable (2P) reserves of 10.5 million barrels (approximately 2 percent of DNO International’s 2P reserves). On a combined basis, Calvalley would add production of 1,942 bopd (based on Q1 2012 data) and 2P reserves of 29.3 million barrels (as at year end 2011). Block 9 is located within the same area as DNO International’s current Yemen assets and operations.
The all-cash offer will not be subject to any financing condition. Macquarie Capital is DNO International’s financial advisor and Stikeman Elliott LLP is DNO International’s legal advisor. DNO International first approached Calvalley in late May with the aim of reaching a negotiated transaction to combine the two companies. Written offers to acquire all currently issued and outstanding Shares for CAD 2.30 per share followed with the last letter on 7th
June 2012. Despite continued discussion between the companies and DNO International's best efforts, after a month, the Company has not to date received any meaningful engagement from Calvalley’s board of directors or senior management. Given the size of the premium on offer and the potential benefits of the transaction to Calvalley, DNO International felt compelled to bring this offer directly to shareholders.
DNO International expects to commence the offer on or about July 12, 2012 by way of publication of an advertisement and filing of a formal take-over bid circular. The offer will be open for acceptance for a period of 35 days and will expire on or about August 16, 2012 unless extended or withdrawn. Full details of the offer will be included in the formal offer and take-over bid circular to be publicly filed and subsequently mailed to Calvalley's
shareholders.
The offer will be subject to certain conditions, including acceptance of the offer by holders of at least 66 2/3 percent of Calvalley's shares (including those held by DNO International and its affiliates) calculated on a fully-diluted basis and at least a majority of the Shares calculated on a fully-diluted basis the votes attached to which would be included in the minority approval of a second-step business combination under applicable securities laws,
no change having occurred that is, may be or would have a material adverse effect in relation to Calvalley and receipt of all necessary regulatory approvals.
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