20 August 2015, Lagos – The Midwestern Oil and Gas Limited has stated that it would not be able to complete the acquisition of a Canadian oil firm, Mart Resources, as originally scheduled, fuelling concern that the ongoing negotiation between the two companies may result in a lower bid price.
But Toronto-listed Mart said in a statement that Midwestern had informed it that it would not be able to complete the Midwestern financing to acquire Mart at $0.80 per common share.
“Mart and Midwestern are continuing discussions regarding an alternative transaction at a lower price per Mart common share. There is no certainty that the discussions with Midwestern will result in an alternative transaction,” the statement added.
Following this development, Renaissance Capital said in a report last Tuesday that the ongoing negotiations between Mart and Midwestern might result in a new bid at a lower price, which would represent a potential upside risk to investment.
According to the report, as at June 30, 2015, Mart had a total amount of debt outstanding of $200.5 million from Guarantee Trust Bank (GTB).
After considering the deferred principal repayments during the moratorium period, Renaissance said the loan amount due before June 2016 is $45 million, while the loan outstanding due after June 2016 is $154 million.
The report noted that if oil prices and Mart’s production do not pick up in 2016, Mart may struggle to meet its 2016 loan obligations.
Midwestern Oil and Gas Company Limited is the the operator of and one of Mart’s co-venturers in Nigeria’s Umusadege oilfield.
The Letter of Intent entered into by the two companies had set out the intention of Mart Resources and Midwestern on a non-binding basis, to use good faith efforts to negotiate and enter into a definitive agreement.
Under the definitive agreement, Midwestern would agree to acquire all of the issued and outstanding shares of Mart for cash consideration of CAD$0.80 (Canadian dollar) per common share by way of a plan of arrangement.
According to the company, the proposed offer price represents a 40.3 per cent premium to the closing price and a 28 per cent premium to the 20 day volume Weighted Average Price (VWAP) price of Mart’s common shares on the Toronto Stock Exchange on February 27, 2015, the last trading day for Mart’s common shares prior to the date of this announcement.
The parties had initially agreed, on a binding basis, to a period of exclusivity commencing on February 27, 2015 and ending on March 15, 2015, unless earlier terminated, during which Mart would not solicit a proposal that might be competitive with the proposed transaction.
During this period also, Mart and Midwestern was expected to use good faith efforts to finalise the terms of the definitive agreement.
Midwestern however advised Mart that its ability to complete the proposed transaction was subject to completing a private placement financing.
Midwestern agreed to use reasonable commercial efforts to satisfy the financing condition on or prior to June 15, 2015 and to keep Mart informed as to the status and timing of the satisfaction of the financing condition.
– This Day