NOT FOR DISTRIBUTION OR RELEASE IN OR INTO THE UNITED STATES, AUSTRALIA, RUSSIA,
SOUTH AFRICA OR JAPAN
San Leon Energy plc ("San Leon" or the "Company"); (AIM:SLE) and Realm Energy
International Corporation ("Realm"); (TSX VENTURE:RLM) are pleased to announce
that they have entered into an agreement (the "Arrangement Agreement") pursuant
to which San Leon will acquire all of the issued and outstanding shares of Realm
(the "Acquisition").
Pursuant to the Acquisition, each Realm shareholder will receive, for each Realm
share, at such shareholder's election: i) C$1.30 in cash; or ii) 3.30 ordinary
shares in the capital of San Leon (or the same number of exchangeable shares of
an indirect Canadian subsidiary of San Leon exchangeable on a one-for-one basis
directly for ordinary shares in the capital of San Leon, subject to adjustment);
or iii) a combination thereof; subject to a maximum of C$17.7 million in cash
(subject to adjustment) being paid to Realm shareholders in aggregate. The
Acquisition will be implemented by means of a Canadian plan of arrangement and
result in Realm becoming an indirect subsidiary of San Leon, with closing
expected in November 2011.
The terms of the Acquisition value Realm at approximately C$1.30 per share,
based on the San Leon volume-weighted average price ("VWAP") for the 60 trading
days prior to and including 25 August 2011 of 25 pence per share and a Canadian
Dollar per British Pound exchange rate of 1.603. Up to approximately 481 million
newly issued San Leon shares are expected to be issued to Realm shareholders
(assuming that such shareholders elect to receive the consideration payable to
them fully in new San Leon shares).
The Board of Directors of each of San Leon and Realm have unanimously approved
the Acquisition. The Board of Directors of Realm has received the opinion of its
financial advisors that the consideration to be received pursuant to the
Acquisition is fair, from a financial point of view, to Realm shareholders and
has resolved to recommend that Realm shareholders vote in favour of the
Acquisition.
The directors and officers of Realm, corporations controlled by them and certain
other significant shareholders of Realm, together holding or controlling an
aggregate of 40,912,276 Realm shares (being more than 37.7% of the issued Realm
shares) have agreed to vote in favour of the Acquisition.
Acquisition Rationale
The Board of Directors of San Leon believes that the acquisition of Realm has
significant commercial logic and would bring together two complementary
portfolios to create a focused and large shale acreage position in Poland's
Baltic Basin. It is expected that the enlarged group will benefit from its
combined operational and technical expertise as well as in-country experience in
order to accelerate work programmes and de-risk the acreage. The combined
position in Poland is also expected to provide cost synergies for the
aforementioned work programmes.
This increased focus on shale may be further enhanced through the addition of
any successful licence applications that Realm has submitted in Spain and
France. To complement this large shale acreage position and associated work
programmes, San Leon expects to continue to develop its conventional acreage in
Poland, Albania, Morocco and Ireland in order to seek to build reserves, produce
near-term cash flow and provide funding for work programmes going forward. The
Board of Directors of San Leon believes that the enlarged group will be well
capitalised to carry out its existing licence obligations through the addition
of approximately C$24 million of cash currently on Realm's balance sheet.
The enlarged company will hold 28 concessions and licences in seven countries,
with a continued focus on Poland, Morocco and Albania. San Leon is currently
undertaking an extensive exploration programme and expects to drill 16 wells
over the next twelve months.
The Board of Directors of San Leon believes that the combination of San Leon and
Realm presents a unique opportunity to create significant value for shareholders
in both companies.
The benefits of the Acquisition for Realm shareholders include:
-- The implied value of the Acquisition is approximately C$1.30 per Realm
share(1).
-- a premium of 46.1% to the current share price of Realm(2);
-- a premium of 116.7% to Realm's closing share price the day prior to
San Leon's first approach to Realm's Board(3); and
-- a premium of 136.4% to Realm's closing share price the day prior to
the announcement of the initiation of a strategic review of Realm's
Polish interests(4).
-- The Acquisition will result in Realm shareholders owning approximately
36.9% of the enlarged entity(5), assuming that all shareholders elect to
receive the consideration payable to them fully in new San Leon shares
and all of the issued and outstanding options and warrants to acquire
Realm shares are exercised.
-- The exchangeable shares offer certain Realm shareholders who are
residents of Canada for the purposes of the Income Tax Act (Canada) the
opportunity to obtain a full or partial deferral of taxable capital
gains for Canadian federal income tax purposes in certain circumstances.
-- The ability to receive, at the election of Realm shareholders, San Leon
shares or exchangeable shares gives Realm shareholders the opportunity
to continue to participate in the future growth of the development of
the Realm assets through an entity with cost and operational synergies.
-- The Arrangement Agreement provides that Realm shareholders will have the
right to dissent from participating in the Acquisition and to elect to
receive a fair value payment for their shares from Realm post-closing.
Acquisition Highlights
The Board of Directors of San Leon believes that the combination of San Leon and
Realm will:
-- strengthen San Leon's focus and position as one of the leading shale
players in Poland;
-- materially increase San Leon's acreage in Poland's Baltic Basin;
-- leverage San Leon's in-country technical team to add material value to
Realm's assets;
-- have the potential to add further shale acreage to the portfolio through
any successful licence applications that Realm has made in Spain and
France; and,
-- provide cost and operational synergies for upcoming seismic and drilling
programmes.
San Leon will acquire the following:
-- 4 exploration licences across Poland and Germany;
-- 10 licence applications in Spain and 10 licence applications in France;
-- greater than 2.4 million gross acres under application in France and
greater than 2.0 million gross acres under application in Spain; and,
-- approximately C$24 million of cash currently on Realm's balance sheet.
Realm's asset base is detailed in the table below:
----------------------------------------------------------------------------
Net Gross Net
Country Licence Basin Interest Operator Acres Acres
----------------------------------------------------------------------------
Poland Gniew Baltic 100% Realm 294,296 294,296
----------------------------------------------------------------------------
Ilawa Baltic 50% LNG Energy 161,109 80,555
----------------------------------------------------------------------------
Wegrow Podlasie 50% LNG Energy 180,136 90,068
----------------------------------------------------------------------------
Lower
Germany Aschen Saxony 100% Realm 15,888 15,888
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total 651,429 480,807
----------------------------------------------------------------------------
Additional Terms of the Agreement
Pursuant to the Arrangement Agreement, Realm will call a meeting of its
shareholders to consider and, if determined advisable, approve the plan of
arrangement implementing the Acquisition. It is expected that the information
circular relating to the Acquisition will be mailed to Realm shareholders in
September 2011 and that, subject to the satisfaction, or where relevant waiver,
of all relevant conditions, the Arrangement will become effective and the
Acquisition completed in November 2011.
Conditions
The Acquisition is subject to a number of customary conditions, including the
receipt of approval by the Realm shareholders, receipt of approval of the Court
in the Province of British Columbia, Canada and receipt of stock exchange
approvals.
Non-Solicitation Agreement and Termination Fees
The Arrangement Agreement contains customary non-solicitation provisions which
restrict Realm from soliciting or entering third party acquisition proposals,
subject to a "fiduciary out" and a matching right in favour of San Leon.
Pursuant to the Arrangement Agreement, each of Realm and San Leon has agreed to
pay the other a termination fee of C$4.0 million if the Arrangement Agreement or
terminated in specified circumstances.
Realm Share Options and Warrants
In connection with the Acquisition, outstanding options and warrants to acquire
an aggregate of 37.4 million Realm shares will become options and warrants to
acquire San Leon shares on substantially equivalent terms and conditions.
Oisin Fanning, Executive Chairman of San Leon, commented:
"We are delighted to have reached agreement with the Realm board and its major
shareholders. This is San Leon's most significant acquisition to date and offers
a unique opportunity to increase our exposure to the prospective upside that the
Baltic Basin offers, which we expect will be enhanced by any successful shale
licence applications in Spain and France. We also expect this deal to bring
significant cost and operational synergies across the upcoming drilling
programme whilst further enhancing the technical expertise in the Company.
The Board of San Leon believe that this acquisition will create significant
value for shareholders in both companies without reducing exposure to the
potential upside, whilst the Company continues to develop its conventional
acreage across its portfolio in order to seek to build reserves, produce
near-term cash flow and provide funding for work programmes going forward."
Craig Steinke, Executive Chairman and CEO of Realm, commented:
"A combination of Realm and San Leon provides shareholders with diversity and
substantial scale in the Baltic Basin of Poland, which is generally viewed as
one of the most opportune new shale plays in Europe. As well, currently under
government application in France and Spain, Realm has targeted over 4.4 million
acres of organic rich shales, which subject to final awards, provides vast
additional resource potential."
Information with respect to Realm
Realm is an independent oil and gas exploration and appraisal company listed on
the TSX Venture Exchange (ticker symbol: RLM). The company holds 4 exploration
licences across Poland and Germany as well as 10 licence applications in Spain
and 10 licence applications in France. Its strategy is to focus on shale
exploration and development opportunities.
Realm has been awarded 635,000 gross acres in Poland (465,000 net) and 15,888
gross acres in Germany (15,888 net). In addition, Realm has greater than 2.4
million gross acres under application in France and greater than 2.0 million
gross acres under application in Spain. Realm's asset base is detailed in the
table below:
----------------------------------------------------------------------------
Net Gross Net
Country Licence Basin Interest Operator Acres Acres
----------------------------------------------------------------------------
Poland Gniew Baltic 100% Realm 294,296 294,296
----------------------------------------------------------------------------
Ilawa Baltic 50% LNG Energy 161,109 80,555
----------------------------------------------------------------------------
Wegrow Podlasie 50% LNG Energy 180,136 90,068
----------------------------------------------------------------------------
Lower
Germany Aschen Saxony 100% Realm 15,888 15,888
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total 651,429 480,807
----------------------------------------------------------------------------
Overseas Shareholders of Realm
Participation in the Acquisition and the plan of arrangement effecting the
Acquisition by persons who are not resident in Canada or the United Kingdom
("Overseas Shareholders") may be affected by the laws of the jurisdictions
("Overseas Jurisdictions") in which they are resident. Such persons should
inform themselves about and observe any applicable requirements. Further details
in relation to Overseas Shareholders will be contained in the information
circular to be forwarded to Realm shareholders.
Any failure to comply with applicable restrictions may constitute a violation of
the securities laws of any such Overseas Jurisdiction. To the fullest extent
permitted by applicable law, the companies involved in the Acquisition disclaim
any responsibility or liability for the violation of such restrictions by any
person.
This announcement has been prepared for the purposes of complying with Canadian
law and the AIM Rules for Companies and the information disclosed herein may not
be the same as that which would have been prepared in accordance with the laws
of other jurisdictions.
Unless otherwise determined by San Leon, and permitted by applicable law and
regulation, the San Leon shares to be issued in connection with the Acquisition
will not be issued directly to Realm shareholders in, and will not be capable of
acceptance in or from, any Overseas Jurisdiction where to do so would constitute
a breach of securities laws in that jurisdiction. Copies of this announcement
are not being, and must not be, mailed or otherwise forwarded, distributed or
sent in, into or from any Overseas Jurisdiction where to do so would constitute
a breach of securities laws in that jurisdiction. Persons receiving this
announcement (including custodians, nominees and trustees) should observe these
restrictions and should not send or distribute this announcement in, into or
from any such jurisdictions.
Neither the San Leon shares nor the exchangeable shares to be issued by a
subsidiary of San Leon pursuant to the Acquisition ("exchangeable shares") have
been, nor will they be, registered under the US Securities Act of 1933 (the
"Securities Act") or under any of the relevant securities laws of any state or
other jurisdiction of the United States. Neither the US Securities and Exchange
Commission nor any US state securities commission has approved of the San Leon
shares or the exchangeable shares or determined if this document is accurate or
complete. Any representation to the contrary is a criminal offence in the United
States. The San Leon shares and the exchangeable shares to be issued pursuant to
the plan of arrangement are intended to be issued in reliance upon the exemption
from the registration requirements of the Securities Act provided by section
3(a)(10) thereof and only to the extent that corresponding exemptions from the
registration or qualification requirements of state "blue sky" securities laws
are available. Neither the San Leon shares nor the exchangeable shares may be
offered or sold in the United States except pursuant to an exemption from the
Securities Act or in a transaction not subject to the registration requirements
of the Securities Act.
General
The Acquisition is subject to the terms and conditions of the Arrangement
Agreement which will be described in the information circular which Realm
intends to mail to its shareholders in September 2011. That information
circular, a form of proxy and a form of election and transmittal letter, to be
included therein, will be made available to all Realm shareholders at no cost to
them. Realm shareholders are advised to read the information circular and the
accompanying documents when they are sent to them because they will contain
important information. The documents will be posted under Realm's profile at
www.sedar.com.
This announcement is not intended to be and does not constitute, or form part
of, an offer to sell or an invitation to purchase or subscribe for any
securities or the solicitation of an offer to buy or subscribe for any
securities pursuant to the Acquisition or otherwise, nor shall there be any
purchase, sale or exchange of securities or such solicitation in any
jurisdiction in which such offer, solicitation or sale or exchange would be
unlawful prior to the registration or qualification under the laws of such
jurisdiction.
The distribution of this announcement in jurisdictions or into certain
jurisdictions may be restricted by the laws of those jurisdictions. Accordingly,
copies of this announcement and all other documents relating to the Acquisition
and/or the plan of arrangement are not being, and must not be, released,
published, mailed or otherwise forwarded, distributed or sent in, into or from
the United States, Australia, (South Africa, Russia) or Japan. Persons receiving
such documents (including, without limitation, nominees, trustees and
custodians) should observe these restrictions. Failure to do so may constitute a
violation of the securities laws of any such jurisdiction.
Forward Looking Statements
This announcement contains certain forward-looking statements with respect to
the financial condition, results of operations and business of Realm and San
Leon and certain plans and objectives of the boards of directors of Realm and
San Leon. These forward-looking statements can be identified by the fact that
they do not relate only to historical or current facts. Forward-looking
statements often use words such as "anticipate", "target", "expect", "estimate",
"intend", "plan", "goal", "believe", "will", "may", "should", "would", "could"
or other words of similar meaning. By their nature, forward-looking statements
involve risks and uncertainties that could cause actual results and developments
to differ materially from those expressed in or implied by such forward-looking
statements. Many of these risks and uncertainties relate to factors that are
beyond Realm's and San Leon's abilities to control or estimate precisely, such
as future market conditions and the behaviours of other market participants, and
therefore undue reliance should not be placed on such statements. Should one or
more of these risks or uncertainties materialise, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described in this announcement. There are risks also inherent in the nature of
the Acquisition, including failure to realize anticipated synergies or cost
savings; risks regarding the integration of the two entities; incorrect
assessments of the values of the other entity; and failure to obtain the
required securityholder, Court, regulatory and other third party approvals.
Realm and San Leon assume no obligation and do not intend to update or correct
these forward-looking statements, except as required pursuant to applicable law.
Notes to Editors
San Leon
San Leon is an independent oil and gas exploration and production company listed
on London's Alternative Investment Market (ticker symbol: SLE). The company
holds exploration assets in Poland, Morocco, Albania, Ireland, and Italy. San
Leon's focus is on both shale and conventional exploration across its portfolio.
Realm
Realm is a Canadian domiciled global energy company focused on driving the
exploration and development of major shale plays throughout Europe and emerging
countries. The Company presently has projects in Poland and Germany and is in
the process of acquiring additional petroleum and natural gas rights in other
European basins which have been identified as high potential. Realm is committed
to leveraging the most advanced shale technology to bring these resources into
production. Visit Realm's website at www.realmenergy.ca.
Advisors
San Leon has engaged Macquarie Capital (Europe) Limited as its exclusive
financial advisor in connection with the Acquisition. Realm has engaged GMP
Securities L.P. as its exclusive financial advisor in connection with the
Acquisition.
----------------------------------------------------------------------
(1) Based on San Leon's 60-day VWAP prior to and including 25 August
2011 of 25 pence per share and a Canadian Dollar per British
Pound exchange rate of 1.603
(2) Based on Realm's mid-market closing price on 25 August 2011 of
0.89 Canadian dollars per share, as provided by the Toronto Stock
Exchange
(3) Based on Realm's mid-market closing price on 16 June 2011 of 0.60
Canadian dollars per share, as provided by the Toronto Stock
Exchange
(4) Based on Realm's mid-market closing price on 26 May 2011 of 0.55
Canadian dollars per share, as provided by the Toronto Stock
Exchange
(5) Assumes all outstanding Realm options and warrants are exercised
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