Gran Tierra Energy Inc. and Solana Resources Limited have entered into a definitive agreement providing for the business combination of Gran Tierra Energy Inc. and Solana Resources Limited. The transaction is expected to create an exploration and production company with a significantly increased operating scale and balance sheet.
Mr. Dana Coffield, President and Chief Executive Officer of Gran Tierra, will continue as the President and Chief Executive Officer of the combined company, while Mr. J. Scott Price, President and Chief Executive Officer of Solana, will join the board of directors of the combined company. The board of directors will be comprised of seven members including the current directors of Gran Tierra: Jeffrey Scott, Walter Dawson, Verne Johnson, Nick Kirton, and Dana Coffield, as well as Scott Price, and the current Chairman of the Solana board of directors, Mr. Ray Antony. Mr. Scott, Chairman of the Gran Tierra board of directors, will maintain his position as Chairman.
Commenting on the transaction Mr. Coffield stated, "We are very pleased to make this announcement and we expect the transaction will create a much more substantial company in a consolidating global industry while preserving Gran Tierra's operating leadership. The combination creates a company with a 100 percent working interest in one of the most important oil discoveries in Colombia in recent years, the Costayaco field. The anticipated production and cash flow growth from Colombia will fund continued exploration on the resulting company's combined land position, in addition to increasing the capability to undertake much larger and material new venture initiatives in the future."
Mr. Price stated, "The combination of the two companies will not only consolidate a premium light oil asset in Colombia, but will also launch a substantive, well financed, South American focused entity with an enviable land position and a portfolio of opportunities across the risk spectrum. We believe this transaction will result in significant value accruing from the asset consolidation and resultant economies of scale."
Summary of the Transaction
Under the terms of the Agreement, each Solana shareholder will receive either (i) 0.9527918 of a common share of Gran Tierra or; (ii) 0.9527918 of a common share of a Canadian subsidiary of Gran Tierra (an "Exchangeable Share") for each common share of Solana held, which represents a premium of approximately 14.1 % to the 20 day weighted average trading price to July 28, 2008 of the Solana shares on the TSX Venture Exchange and Gran Tierra's July 28, 2008, closing price on the Toronto Stock Exchange of CAD $5.73. The shares of the Canadian subsidiary of Gran Tierra: (i) will have the same voting rights, dividend entitlements and other attributes as Gran Tierra common stock; (ii) will be exchangeable, at each shareholder's option, on a one-for-one basis, into Gran Tierra common stock; and (iii) subject to compliance with the listing requirements of the Toronto Stock Exchange, will be listed on the Toronto Stock Exchange. The Exchangeable Shares will automatically be exchanged for Gran Tierra common stock five years from closing, and in certain other events.
The transaction will be completed pursuant to a statutory plan of arrangement pursuant to the Business Corporations Act (Alberta). Upon completion of the transaction, Solana will become an indirect wholly-owned subsidiary of Gran Tierra. The plan of arrangement will be accomplished on a tax deferred basis in Canada, but may be a taxable transaction for non-Canadian holders of Solana securities. On a fully diluted basis, upon the closing of the plan of arrangement, Solana securityholders will own approximately 49% of the combined company and Gran Tierra securityholders will own approximately 51% of the combined company.
The proposed transaction is subject to regulatory, stock exchange, court and shareholder approvals. Gran Tierra and Solana expect to hold shareholder meetings in October 2008. A joint proxy statement and management information circular is expected to be mailed to shareholders of the companies in September 2008. The parties have agreed to pay each other a termination fee of $21 million in certain circumstances and an expense reimbursement fee of $1.5 million in certain other circumstances.
Review all our latest Acquisitions and Mergers news