M&A / High Point Energy
High Point and Mesquite announce agreement for High Point to acquire Mesquite
CALGARY, April 19 /CNW/ - High Point Energy Corp. ("High Point") (CDNX:HPE) and Mesquite Exploration Ltd. ("Mesquite") (CDNX:MQL) jointly announce they have entered into an arm's length agreement for a business combination ("Combination") pursuant to which High Point will acquire all of the issued and outstanding shares of Mesquite on the basis of three common shares (pre-consolidation) of High Point for each common share of Mesquite.
The total consideration under the Combination is approximately $48.5 million, comprised of $19.5 million of assumed debt, including $3 million principal amount of convertible debentures (which after the Combination will be convertible into High Point shares) and the balance by the issue of High Point common shares.
The Combination is subject to certain conditions, including receipt of all required regulatory approvals. High Point and Mesquite will determine, within the next week, whether to proceed with the Combination by way of take over bid, plan of arrangement or amalgamation following further analysis of certain securities, tax and regulatory requirements. The transaction is expected to be completed on or about mid June, 2002.
The Combination has the unanimous support of the Board of Directors of both High Point and Mesquite. Griffiths McBurney & Partners is acting as financial advisor to Mesquite in respect of the Combination and will render a fairness opinion that the Combination is fair from a financial point of view to Mesquite shareholders. Shareholders of Mesquite who hold or control in excess of 70% of the outstanding common shares of Mesquite have entered into lock-up agreements with High Point agreeing to support the Combination.
Mesquite has agreed to pay High Point a non-completion fee of $1 million in certain circumstances. Mesquite has agreed to terminate all discussions with other parties and not to solicit further offers and has granted High Point a right of first refusal with respect to subsequent offers.
High Point intends to call a shareholder's meeting to approve, subject to closing of the transaction, a three for one consolidation of its common shares, a change of name, and the appointment of a new Board of Directors. The agreement contemplates that the slate to be proposed will include three of the existing High Point directors (being Glen Yeryk, Glenn Carley and Fred Coles), three nominees of Mesquite (Christina Fehr, Keith Conrad and Don Rowden) and, subject to the approval of the shareholders, John Brussa a law partner of Burnet, Duckworth & Palmer LLP. High Point's management will continue unchanged.
High Point will issue approximately 56.2 million common shares (pre consolidation) pursuant to the Combination (approximately 18.7 million after the consolidation). After the acquisition of all of the outstanding Mesquite shares pursuant to the Combination and the consolidation, High Point will have approximately 30.6 million common shares outstanding. Pursuant to the Combination, Mesquite's outstanding share purchase warrants will become exercisable into High Point shares adjusted for the exchange ratio.
Following completion of the transaction, High Point is currently intending to dispose on an arm's length basis, approximately $15 million of Mesquite's oil properties. Mesquite's oil properties are located at Mitsue, Progress and Utikuma, Alberta and Lloydminster, Saskatchewan. Closing of the property dispositions would be conditional upon successful completion of the Combination. Mesquite's natural gas properties are located at Medicine Lodge and Progress, Alberta. High Point is also negotiating the acquisition, on an arm's length basis, of additional natural gas properties. Following the closing of these transactions, if completed, High Point is targeting to have in excess of 80% of its asset value from natural gas properties and a debt to cash flow ratio of below one.
High Point will continue to focus on natural gas, liquids and light oil production west of the 5th and 6th meridians in Alberta and in North-East British Columbia.
Scott St. John, the President of Mesquite, stated that "after an extensive review of strategic alternatives, the Board of Directors concluded that the combination with High Point is the best alternative for the Mesquite shareholders and offers them the opportunity to participate in High Point's significant upside potential."
Glen Yeryk, the President and Chief Executive Officer of High Point, stated that "the combining of Mesquite's solid production and development prospects with High Point's exploration and on going development provides a full cycle, well positioned and funded vehicle to create focused natural gas production growth."
Currently, Mesquite has daily production of 1,800 BOEs (6:1) comprised of 1,400 barrels of oil and liquids and 2.5 million cubic feet of gas. Current undeveloped land value is $1.2 million. Current proven and probable reserves are 4.4 millions of barrels of oil equivalent (6:1). The combined company has identified 40 drilling locations on 43,000 net undeveloped acres. |
