Jindal Steel & Power Ltd (JSPL), through its Mauritius arm, has entered into a binding merger agreement with Toronto Stock Exchange listed CIC Energy Corp (CIC) which would see CIC merging with a new entity, Jindal BVI. Holders of the outstanding shares of CIC will receive CDN $2 per share. The deal values CIC at approximately CDN$116 million or $115 million (Rs 638 crore).
The offer marks a premium of 65 per cent to the volume-weighted average trading price for CIC shares on the TSX for the 30-trading day period ended July 17, the last trading day prior to the announcement of the indicative price. It also represents a premium of 42 per cent to the closing price of CIC shares on the TSX on July 17 and 27.4 per cent premium to the last traded price on Monday July 23.
The CIC board has recommended acceptance of the merger by CIC Energy shareholders.
“In the current challenging economic and capital markets environment, we believe that this offer provides fair value for CIC Energy shareholders,” said Warren Newfield, chairman and CEO of CIC Energy.
CIC will be holding a special meeting of shareholders on or before August 28 to consider and approve the merger.
CIC has agreed to customary standstill undertakings not to solicit or invite alternative acquisition proposals and right to match covenants in favour of Jindal. Both sides have agreed to a termination fee of approximately CDN$3.5 million if the merger is not completed in certain circumstances.
The agreement provides for an outside date of October 9, 2012 for the completion of the merger.
Deutsche Bank Securities is acting as financial advisor to CIC in connection with the transaction.
CIC’s assets largely involves Mmamabula coalfield in Botswana, Africa. Earlier this was supposed to have multiple projects including exporting coal besides a string of power projects. Last year, the company revised its corporate strategy to focus on the coal exports as its primary project.
Exploration drilling at the Mmamabula Coal Field has shown CIC has approximately 2.4 billion tonnes of coal with the potential for exports as well as feeding multiple power stations and a coal-to-hydrocarbons plant.
The exports business envisions seaborne traded steam coal from the Mmamabula Coal Field being exported to international markets from the west coast of southern Africa. This includes dedicated mines with multi-product beneficiation plants, an approximately 1,500 km Trans Kalahari Rail line to be constructed by a transportation consortium that could include CIC.
Currently, the governments of Botswana and Namibia are evaluating Expressions of Interest to develop the rail line and a port in Namibia.
This apart, CIC also plans to get into coal-to-hydrocarbons project to convert some of the coal at the Mmamabula Coal Field to low sulphur diesel fuel.
British Virgin Island domiciled CIC was estimated to have total exploration and evaluation assets value of CDN $166.6 million, as of May 31.
For JSPL, the latest deal comes as a breather after its ambitious $2.1 billion project in Bolivia had to be scrapped after over five years of negotiations. The project, which would have given JSPL access to one of the world’s largest iron ore reserves, faced various roadblocks, with the key issue being supply of gas from the Bolivian government.
JSPL, India’s most valued private sector steel company, saw its share price rise marginally 0.22 per cent in early trades on Tuesday and was quoting at Rs 415.1 a share on the BSE in a flat Mumbai market. The firm has a market cap of Rs 38,804 crore, just marginally ahead of Tata Steel.
(Edited by Prem Udayabhanu)