18th Mar 2009 13:05
Emerald Energy Plc
For Immediate Release
18 March 2009
Waiver of the obligation to make a general offer under Rule 9 of the Code, Notice of Extraordinary General Meeting and Directors' Shareholding
Emerald Energy Plc ("Emerald" or the "Company") is today convening an Extraordinary General Meeting of its shareholders to be held on 11.15 a.m., or as soon thereafter as the Company's AGM has concluded, at the offices of Foreign Press Association, 11 Carlton House Terrace, London SW1Y 5AJ on 24 April 2009. The purpose of the EGM is for the Company to seek the approval of the Rule 9 Waivers from the Independent Shareholders of the Company. The full text of the Circular sent out to Shareholders convening the EGM (the "Circular") can be found on the Company's website: www.emeraldenergy.com.
Copies of the Circular will also be available for inspection at:
UK Listing Authority Document Viewing Facility
Financial Services Authority
25 The North ColonnadeCanary Wharf
London E14 5HS
Further information regarding the resolutions (the "Resolutions") to be proposed at the EGM (the "Proposals") and the reasons why the directors support the Proposals are provided below.
Background to and Reasons for the Proposals
During August and September 2003, Waterford Finance & Investment Limited ("Waterford") subscribed for Ordinary Shares representing 44.91 per cent. of the Company's then issued share capital (the "2003 Transactions").
In accordance with Rule 9 and, except with the consent of the Panel, when:
that person or persons acting in concert will be required to normally make an offer to the holders of any class of equity share capital to purchase those shares, unless this requirement is waived by the Panel and the waiver is approved by the Independent Shareholders of the relevant company at a general meeting. An offer under Rule 9 must be made in cash (or be accompanied by a full cash alternative) and at not less than the highest price paid by that person or persons acting in concert with them during the twelve months prior to the announcement of the offer.
In the case of the 2003 Transactions, the Panel waived the obligation on Waterford to make a mandatory offer under Rule 9 and the waiver was approved by Independent Shareholders at an extraordinary general meeting held on 15 August 2003. The 2003 Transactions were set out fully in a prospectus issued by the Company on 18 July 2003. Waterford currently holds 30.92 per cent. of the issued share capital of the Company.
At the time, the Panel deemed that Alastair Beardsall, Edward Grace and Fred Ponsonby were acting in concert with Waterford.
The Concert Party Persons currently hold options exercisable over 2,350,000 Ordinary Shares granted under the rules of the Scheme. Due to an oversight by the Company and its advisers, the issue of the Options was not approved by a vote of the independent shareholders as required by note 10 under Rule 9.
The exercise period for 1,450,000 of the Options was due to expire on 27 August 2008, but was extended by one year to 27 August 2009 following an amendment to the Scheme approved by Shareholders at an Extraordinary General Meeting of the Company held on 26 August 2008. Of these options, 1,000,000 are held by Alastair Beardsall, 300,000 are held by Edward Grace and 150,000 are held by Fred Ponsonby. In addition to these options, Alastair Beardsall holds 500,000 options, Edward Grace holds 250,000 options and Fred Ponsonby holds 150,000 options - all expiring at various dates before 26 April 2011. None of the Concert Party Persons currently hold any Ordinary Shares.
All of the Options are exercisable and the Concert Party Persons would like to exercise their options before they expire. As these persons are deemed by the Panel to be acting in concert with Waterford, upon exercise of any of the Options the aggregate percentage shareholding of the Concert Party would increase to a level that would trigger an obligation under Rule 9 for the Concert Party to make a mandatory offer to acquire the entire issued share capital of the Company.
In the event that the Rule 9 Waiver is not approved by the Independent Shareholders, the Concert Party Persons intend to seek an alternative settlement existing within the Scheme entitling participants, in certain circumstances, to receive on exercise of their options, cash in lieu of Ordinary Shares, consequently requiring the Company to utilise some £6 million of its cash reserves. The Concert Party Persons, however, would strongly prefer to have an equity interest in the Company in order to align their interests to those of Shareholders.
In addition, on 18 March 2009 the Board granted, subject to the receipt of the Second Rule 9 Waiver, further options to Alastair Beardsall and Edward Grace pursuant to the rules of the Scheme. In the event that any of Alastair Beardsall or Edward Grace exercise any of the New Options, whilst they remain a member of the Concert Party and whilst the Concert Party continues to hold in excess of 30% of the issued share capital of the Company, the obligations under Rule 9 to make a mandatory offer would arise. The Panel has agreed to waive the obligation on the Concert Party to make a mandatory offer on exercise of the New Options provided the Second Rule 9 Waiver is approved by Independent Shareholders at the EGM, if it is not, the New Options shall lapse immediately.
The terms of the New Options are as follows:-
|
Name |
Number of Ordinary Shares |
Price |
Exercise Period |
|
Alastair Beardsall |
200,000 |
425p |
18 March 2010 to 18 March 2014 |
|
Edward Grace |
100,000 |
425p |
18 March 2010 to 18 March 2014 |
In these exceptional circumstances, the Panel has agreed that the Company may seek a retrospective waiver of the obligation that arose under Rule 9 on the issue of the Options to the Concert Party Persons to allow the Concert Party Persons to subscribe for Ordinary Shares on exercise of the Options without triggering the obligation on the Concert Party under Rule 9 to make a mandatory offer. The Panel has agreed to this waiver on the basis that the Independent Directors, who have been so advised by Evolution, believe that it is in the best interests of Shareholders for the Independent Shareholders to approve this waiver at this time.
Evolution has provided advice to the Independent Directors in relation to the waiver of the obligations of Rule 9 of the City Code in accordance with the requirements of the City Code. As part of its advice to the Independent Directors in connection with the Proposals, Evolution has referred to a number of factors which the Independent Shareholders should take into account including, inter alia, on the one hand the following factors:
and on the other hand:
in the event that the Options and the New Options are exercised in full and the Ordinary Shares are retained, the Concert Party's interest will increase from 30.92 per cent. to a maximum of 33.86 per cent.
In providing advice to the Independent Directors, Evolution has taken account of the commercial assessments of the Independent Directors.
Waiver of the obligation to make a general offer under Rule 9 of the Code
If the EGM Resolutions are approved by the Independent Shareholders, the Proposals are implemented in full and the Options and the New Options are subsequently exercised in full at the earliest opportunity and the Ordinary Shares are retained by the Concert Party, then the Concert Party's holding will increase from 18,456,755 Ordinary Shares, representing 30.92 per cent. of the issued share capital, to 21,106,755 Ordinary Shares, representing 33.86 per cent. of the enlarged issued share capital (assuming no other Ordinary Shares are issued during the interim period).
If only the Resolutions relating to the Rule 9 Waiver are approved by the Independent Shareholders and the Options are subsequently exercised in full at the earliest opportunity and the Ordinary Shares are retained by the Concert Party, then the Concert Party's holding will increase from 18,456,755 Ordinary Shares, representing 30.92 per cent. of the current issued share capital of the Company, to 20,806,755 Ordinary Shares, representing 33.54 per cent. of the enlarged issued share capital of the Company (assuming no other Ordinary Shares are issued during the interim period).
If only the EGM Resolutions relating to the Second Rule 9 Waiver are approved by the Independent Shareholders and just the New Options are subsequently exercised in full, then the Concert Party's holding will increase from 18,456,755 Ordinary Shares, representing 30.92 per cent. of the current issued share capital, to 18,756,755 Ordinary Shares, representing 31.27 per cent. of the enlarged issued share capital (assuming no other Ordinary Shares are issued during the interim period).
Having regard to the percentage shareholdings noted above, the exercise of the Options and the New Options would, in the absence of the Panel agreeing to the Rule 9 Waiver and the Second Rule 9 Waiver, give rise to an obligation on the part of the Concert Party to make an offer to all remaining Shareholders to purchase their Ordinary Shares. The effect of the exercise of the Options and the New Options on the holdings of the individual members of the Concert Party are set out below:
|
Ordinary Shares Currently held |
Options held |
Maximum Percentage holding of the enlarged issued share capital following the exercise of the Options |
New Options held |
Maximum Percentage holding of the enlarged issued share capital following the exercise of the New Options |
Maximum possible holding following the exercise of the Options and the New Options |
Percentage holding of the enlarged issued share capital |
|
|
Waterford |
18,456,755 |
- |
29.75% |
- |
30.77% |
18,456,755 |
29.61% |
|
Alastair Beardsall |
- |
1,500,000 |
2.42% |
200,000 |
0.33% |
1,700,000 |
2.73% |
|
Edward Grace |
- |
550,000 |
0.89% |
100,000 |
0.17% |
650,000 |
1.04% |
|
Fred Ponsonby |
- |
300,000 |
0.48% |
- |
- |
300,000 |
0.48% |
|
Total |
18,456,755 |
2,350,000 |
33.54% |
300,000 |
31.27% |
21,106,755 |
33.86% |
The Panel has agreed, subject to the EGM Resolutions being passed on a poll by the Independent Shareholders, to waive the obligation that would otherwise arise under Rule 9 as a result of the exercise of the Options and the New Options. For the avoidance of doubt, members of the Concert Party cannot vote on the Proposals at the EGM.
The Rule 9 Waiver will be invalidated if any member of the Concert Party acquires any additional interest in Ordinary Shares in the period between posting of this document and the EGM. The Concert Party has confirmed that it does not have any intention of acquiring any such interest during this period.
Following the exercise in full of the Options and the New Options, members of the Concert Party will between them be interested in Ordinary Shares carrying 30 per cent. or more of the Company's voting share capital, but will not hold shares carrying over 50 per cent. of such voting rights (for as long as they are deemed to be acting in concert) and any further increase in that aggregate interest in shares will be subject to provisions of Rule 9.
Information on the Concert Party
Waterford is a privately owned investment vehicle registered in Guernsey.
The Panel has deemed that Alastair Beardsall, Edward Grace, Fred Ponsonby, Waterford and persons acting in concert with any of them are acting in concert for the purposes of Rule 9.
Further information on Waterford is set out in Appendix I to this announcement.
Intentions of the Concert Party
The Concert Party is not intending to seek any changes to the Board and has confirmed that it would be its intention that, following any increase in their proportionate shareholding as a result of the exercise of the Options, the business of the Company would be continued in substantially the same manner as at present, with no major changes. With this in mind, there will be no repercussions on employment or the location of the Company's places of business and no redeployment of the Company's fixed assets. The Concert Party is also not intending to prejudice the existing employment rights, including pension rights, of any of the employees or management of the Group nor to procure any material change in the conditions of employment of any such employees or management.
Current trading and prospects
Information on current trading and future prospects of the Company is set out in the Chairman's Statement, Review of Operations and Financial Review in the Company's preliminary statement of results for the year ended 31 December 2008 published on 16 March 2009.
EGM
The notice convening the EGM to be held on 24 April 2009 at 11.15 a.m., or as soon thereafter as the AGM convened for 11.00 a.m. on the same day has concluded, is set out in the Circular.
The Concert Party may attend the EGM but will not vote on the EGM Resolutions, which will be taken by means of a poll, meaning that the EGM Resolutions cannot be passed just by a show of hands, but are dependent upon the actual number of Ordinary Shares of the Independent Shareholders that have been voted in favour of the EGM Resolutions. The EGM Resolutions are ordinary resolutions and therefore need the support of more than 50 per cent. of the votes cast by the Independent Shareholders to be approved.
Recommendation
The Independent Directors, who have been advised by Evolution, consider that the Proposals are fair and reasonable and in the best interest of the Company, the Independent Shareholders and Shareholders as a whole. In providing advice to the Independent Directors, Evolution has taken into account the Independent Directors' commercial assessments. Accordingly, the Independent Directors unanimously recommend that the Independent Shareholders vote in favour of the EGM Resolutions at the EGM as they intend to do in respect of their entire holding which amounts to 20,000 Ordinary Shares, representing approximately 0.03 per cent. of the issued share capital of the Company.
Contact: Lisa Hibberd - 020 7925 2440
APPENDIX I - INFORMATION ON THE CONCERT PARTY
1. Waterford Group
The registered shareholders of Waterford Finance & Investment Limited are Weighbridge Trust Limited and Weighbridge Trust Administration Limited who act as nominees for the Michael Kroupeev family trust. Weighbridge Trust Limited is an independent trust company contracted by the Michael Kroupeev Family Trust to act as a trustee and administrator for the family trust. There is no other connection between Michael Kroupeev and Weighbridge Trust Limited and Weighbridge Trust Administration Limited.
In January 2003, Waterford was acquired by Weighbridge Trust Limited and Weighbridge Trust Administration Limited. Waterford had been dormant for at least 18 months preceding the 2003 Transactions. Currently, the shareholding of Waterford in Emerald represents less than 50 per cent. of Waterford's total assets.
Michael Kroupeev holds an MBA from London Business School and has specialised in the financing of oil and gas and other energy related projects in the emerging markets. He has been directly involved in the capital raising for natural resource projects and in acquiring, restructuring, developing and divesting such assets. Michael was an executive director of Dana Petroleum plc since its initial restructuring in 1994 and left its board in 1999. Michael has also served as an executive director of Sibir Energy plc (1999-2000). Michael is a director of Waterford.
2. Directors
The Directors of Waterford are William Stephen Cairns, Michael Kroupeev, Ann Elizabeth Seabrook, and Paul Conway.
3. Incorporation and registered office
Waterford was incorporated on 12 September 1995 with registered number 29975. The registered office of Waterford is Channel House, Forest Lane, St Peter Port, Guernsey.
4. Share capital
The current authorised share capital of Waterford is $10,000 divided into 10,000 shares of $1 each. 10,000 of these shares have been issued, 9,999 shares of $1 to Weighbridge Trust Limited and 1 share of $1 to Weighbridge Trust Administration Limited.
5. Financial information and activities
Waterford is an investment holding company.
In accordance with Guernsey law there is no obligation for Waterford to file Annual Accounts and as a result, it has not published any financial accounts.
6. The Concert Party Persons
The Panel has deemed that Alastair Beardsall, Edward Grace, Fred Ponsonby, Waterford and persons acting in concert with any of them are acting in concert for the purposes of Rule 9.
The Concert Party Persons have previously undertaken work for Waterford on a consulting basis; they have also provided similar services to other clients unrelated to Waterford. Alastair Beardsall and Edward Grace terminated their involvement with Waterford in August 2003 prior to joining the Board; Fred Ponsonby, who is no longer a director of the Company, terminated his involvement with Waterford in September 2005.
Biographies for each of the Concert Party Persons are set out below:
Alastair Beardsall: Executive Chairman of Emerald, aged 55
Alastair Beardsall joined the board of Emerald in 2003 and has been involved in the oil industry since 1981. His first 12 years were on international assignments with Schlumberger, the oil-field services company. In 1992 he started to work for small independent operators, first as technical manager, then project manager and finally holding overall responsibility for specific exploration, development and production ventures.
Edward Grace: Finance Director of Emerald, aged 43
Edward Grace joined the Emerald Board in August 2003, bringing expertise in international corporate finance and experience in management consulting. Having had a successful career in investment banking, where, most recently, he served as Director of Investment Banking with Lehman Brothers, Edward worked with international clients across a number of industrial sectors, raising equity and debt finance and providing M&A advisory. Prior to investment banking, as a management consultant with Accenture, formerly Andersen Consulting, Edward was engaged in projects with some of the largest energy companies in the UK. Edward holds an MBA degree from London Business School.
Fred Ponsonby: Former Non-executive Director of Emerald, aged 50
Fred Ponsonby stepped down as a non-executive director with effect from 1 December 2008.
Fred Ponsonby is an oil industry professional who has also pursued a parallel career in British and European politics. A petroleum engineer by profession, Fred started his career with Charterhouse Petroleum and has most recently worked for LASMO as a senior petroleum engineer and Phibro Energy, a subsidiary of Salomon Brothers, as Technical Manager with responsibility for international E&P projects. He has held a number of company directorships and is currently a non-executive director of Fairfield Energy.
In light of Waterford's interest in the Company, and to ensure the Board is free from conflicts of interest, the Company has entered into the Continuing Relationship Agreement with Waterford, the Concert Party Persons and Merfyn Roberts, details of which are set out below:
A Continuing Relationship Agreement dated 18 July 2003 between Emerald (1), Waterford (2) and Alastair Beardsall, Edward Grace, Fred Ponsonby and Merfyn Roberts (the "Directors") (3), pursuant to which the Directors confirm that they are independent of Waterford and Waterford agrees that (i) Emerald will be capable of carrying on business independently of Waterford and that all transactions and relationships in the future between the two parties will be at arm's length on a normal commercial basis; and (ii) any director of Waterford who is also a director of Emerald shall not vote or be counted in the quorum on any matter in any board meeting where there is a conflict of interest between Emerald and Waterford or any matter voted upon which relates directly or indirectly to Waterford.
The Concert Party Persons have no interest in Waterford nor are there any agreements or arrangements with Waterford other than the past consulting agreements mentioned above and the Continuing Relationship Agreement in which the Concert Party Persons give certain undertakings and warranties with regard to their independence.
7. Management and Employees
As a consequence of the Continuing Relationship Agreement mentioned above, Waterford does not have any influence with regards to the management and employees of Emerald.
APPENDIX II - DEFINITIONS
|
"AGM" |
Annual General Meeting of Shareholders to be held on 24 April 2009; |
|
"Code" |
the City Code on Takeovers and Mergers; |
|
"Concert Party" |
together Waterford, Alastair Beardsall, Edward Grace and Fred Ponsonby; |
|
"Concert Party Persons" |
together Alastair Beardsall, Edward Grace and Fred Ponsonby; |
|
"Continuing Relationship Agreement" |
the continuing relationship agreement between Waterford, Emerald, the Concert Party Persons and Merfyn Roberts dated 18 July 2003, material details of which are set out in paragraph 6 of Part III;
|
|
"Directors" or "Board" |
the directors of Emerald as at the date of this document whose names are set out at paragraph 2.1 of Part IV of this document; |
|
"EGM Notice" |
the notice convening the EGM which is set out at the end of this document; |
|
"EGM Resolutions" |
the resolutions to be proposed at the EGM, as set out in the EGM Notice; |
|
"Emerald" or the "Company" |
Emerald Energy Plc; |
|
"Evolution" |
Evolution Securities Limited, Financial and Rule 3 Adviser to Emerald; |
|
"Extraordinary General Meeting" or "EGM" |
the extraordinary general meeting of Emerald convened for 24 April 2009 (or any adjournment of it), notice of which is set out at the end of this document; |
|
"Group" |
Emerald, its subsidiaries and its subsidiary undertakings (as defined by section 1159 of the 2006 Act); |
|
"Independent Directors" |
Keith Henry, Angus MacAskill and Merfyn Roberts; |
|
"Independent Shareholders" |
the Shareholders other than the Concert Party; |
|
"New Options" |
the 300,000 options granted to Alastair Beardsall and Edward Grace under the Scheme on 17 March 2009 that are the subject of the Second Rule 9 Waiver; |
|
"Options" |
the 2,350,000 options over Ordinary Shares granted to the Concert Party Persons under the Scheme that are the subject of the Rule 9 Waiver; |
|
"Ordinary Shares" |
ordinary shares of 10p each in the capital of Emerald; |
|
"Panel" |
The Panel on Takeovers and Mergers; |
|
"Proposals" |
together the grant of the New Options, the Rule 9 Waiver and the Second Rule 9 Waiver |
|
"Regulatory Information Service" |
any of the services authorised from time to time by the UK Financial Services Authority for the purposes of disseminating regulatory announcements; |
|
"Rule 9" |
Rule 9 of the Code; |
|
"Rule 9 Waiver" |
the waiver granted by the Panel of the obligation which would otherwise arise under Rule 9 requiring the Concert Party to make an offer for all of the issued share capital of Emerald as a result of the exercise of any of the Options; |
|
"Scheme" |
Emerald Energy Plc Discretionary Share Option Scheme; |
|
"Second Rule 9 Waiver" |
the waiver granted by the Panel of the obligation which would otherwise arise under Rule 9 requiring the Concert Party to make an offer for all of the issued share capital of Emerald as a result of the exercise of any of the New Options; |
|
"Shareholder(s)" or "Emerald Shareholder(s)" |
holder(s) of Ordinary Shares; |
|
"UK" or "United Kingdom" |
the United Kingdom of Great Britain and Northern Ireland; |
|
"Waterford" |
Waterford Finance & Investment Limited; |
|
"Waterford Directors" |
the directors of Waterford as at the date of this document whose names are set out at paragraph 2.2 of Part IV of this document; |
|
"$" or "US dollar" |
the lawful currency for the time being of the United States. |
Related Shares:
Emerald Energy