Buy-out announced ArPetrol Ltd. ("ArPetrol" or the "Company") is pleased to announce the signing of a share and debt purchase agreement (the "Agreement") with Empresa Nacional Del Petrleo ("ENAP"), the state owned oil and gas company of Chile, and its subsidiary ENAP Sipetrol Argentina S.A. (the "Purchaser") that provides for the sale of substantially all of the assets of the Company (the "Transaction"). Pursuant to the Agreement, the Purchaser will acquire all of the shares of ArPetrol International Financial Company Inc. ("AIFC"), the wholly owned subsidiary of the Company which indirectly holds the shares of ArPetrol Argentina S.A. ("AASA"). AASA holds all of the Company's operating assets in Argentina. In consideration, the Purchaser will pay the Company an aggregate cash purchase price of US$9.0 million (CAN$11.7 million converted at the March 17, 2016 exchange rate reported by the Bank of Canada) plus an estimated amount of CAN$3.0 million for AASA net working capital at closing, for an estimated total purchase price of approximately CAN$14.7 million (see working capital assumptions in "Forward Looking Information" below).
The estimated total purchase price of CAN$14.7 million, would represent approximate proceeds of CAN$0.65 for each issued and outstanding common share of ArPetrol, most of which the Company intends to distribute to the shareholders of the Company (the "Shareholders") as a return of capital. The Transaction is expected to close in May 2016.
Key Benefits of the Transaction
The Transaction provides Shareholders of ArPetrol with a significant premium over the Company's current share price. Current market conditions for international junior oil and gas companies, and the ability to raise capital in this environment to further develop and expand the Company's assets in Argentina, are very uncertain. It is difficult to predict whether ArPetrol's share price could return to this Transaction valuation or when it could do so. Accordingly, the management and board of directors of the Company determined that this was a unique opportunity to realize such a premium in a very uncertain market.
In the event that the Transaction is ultimately approved and completed according to the terms of the Agreement, the Company will not have any active business operations or assets other than cash. The Company expects to be delisted from the TSX Venture Exchange and to proceed with a voluntary windup and dissolution process following completion of the Transaction. In connection therewith, the Company intends to distribute the available portion of the net proceeds of the Transaction (after payment of Transaction costs and payment of all liabilities and obligations of the Company) to Shareholders in multiple installments as a return of capital. Based on the Transaction terms, it is expected that the initial distribution of approximately 65-70% of the net proceeds of the Transaction will be made to Shareholders shortly after the 90-day purchase price adjustment period for working capital following closing, and a final distribution of the remaining funds will be made after settling all liabilities and expenses of the Company and deducting all Transaction and dissolution costs.
There are many unknown variables that cannot be accurately predicted as this time, along with known items that are difficult to quantify, all of which will impact the ultimate amount of the distribution payable to Shareholders and the distributions may ultimately be materially lower than currently anticipated. However, based on the best available information at the current time (including assumptions regarding currency exchange rates and working capital assumptions in "Forward Looking Information" below), it is anticipated that the cumulative distributions to be paid to Shareholders subsequent to completion of the Transaction are likely to be in the range of approximately CAN$0.59 to $0.62 per common share.