Geodynamics makes takeover bid for KUTh Energy and its Pacific Island projects
With a take over bid for fellow Australian developer KUTh Energy, Geodynamics is eyeing the increasing opportunities of geothermal development on Pacific Islands and the projects held by KUTh in this region.
As reported this morning from Australia, Geodynamics Limited (ASX: GDY) and KUTh Energy Limited (ASX: KEN) have entered into a binding Takeover Bid Implementation Agreement (TBIA) under which Geodynamics will make an off-market takeover bid (Offer) to acquire all of the issued ordinary shares in KUTh.
The Offer is one (1) Geodynamics Share for every five and a half (5.5) KUTh Shares (subject to rounding), representing a 31.6% premium based on the 30-day VWAPs (volume weighted average prices) of Geodynamics and KUTh shares as at 17 September 2013.
The offer price based on Geodynamics’ closing price on the 17 September 2013 values KUTh at approximately $2.65 million based on 145,845,600 ordinary shares on issue and will require Geodynamics to issue 26,517,390 shares to complete the proposed acquisition.
The KUTh Board of Directors will:
- recommend unanimously that shareholders accept the Offer by Geodynamics (with the exception of George Miltenyi, as discussed below).; and
- accept the offer in respect of each of their individual shareholdings, provided in each case that there is no superior proposal.
On completion of the proposed transaction it is the intention of the Board of Geodynamics to invite Mr George Miltenyi, a Non-executive Director of KUTh, to join the Board of Geodynamics. As Mr Miltenyi intends to join the Board of Geodynamics, he will not provide a recommendation with regards to the proposal, but intends to accept the offer in respect of his shareholding in the absence of a superior offer.
KUTh Energy has a portfolio of geothermal energy projects and prospects focussed on growing markets in the Pacific Islands. This market is also a key focus of Geodynamics where it is actively pursuing the Savo Island Geothermal Power Project located in Solomon Islands. KUTh’s primary project is the Takara Geothermal Project in Vanuatu, where it holds a Production Licence providing exclusive rights over a prospective geothermal area located on the north of the main island of Efate. Additionally KUTh has submitted applications for licenses in Papua New Guinea and Fiji. In all these locations there is growing electricity demand and the potential to replace current high cost diesel power supply with cheaper, cleaner and more reliable power through geothermal generation.
The proposed transaction will provide shareholders with access to an enlarged, more diverse portfolio of high quality geothermal projects in the Pacific Islands, realising substantial synergies between Geodynamics’ Savo Island Geothermal Power Project in Solomon Islands and KUTh’s Takara Geothermal Project in Vanuatu. It will enhance Geodynamics’ position as a diversified Australian geothermal energy developer.
KUTh shareholders will have the opportunity to participate in the growth of a well-credentialed and well-funded Australian geothermal energy group, with the opportunity to realise value from an expanded asset base including Geodynamics’ projects in Australia and Solomon Islands. The combination of the companies will ensure that the financial and technical capability is available to accelerate the development of the Takara Geothermal project in parallel with the development of the Savo Island Geothermal Power Project.
Following completion of the transaction the enlarged Geodynamics Group is expected to have a pro-forma market capitalisation of approximately $47.5 million based on the 30-day VWAP of GDY shares at 17 September 2013 and a strong balance sheet with cash of approximately $42.2 million (using cash balances as at 30 June 2013).
Managing Director and Chief Executive Officer of Geodynamics, Geoff Ward, said: “KUTh’s portfolio contains attractive geothermal opportunities that are a strong strategic and commercial fit with Geodynamics’ activities in the Solomon Islands. The combination of Geodynamics’ and KUTh’s portfolio provides shareholders access to a well balanced portfolio of opportunities offering near term revenue and potential for longer term growth within an overall stronger company that is well financed to achieve the development of these projects. The combination of the two groups will allow equipment, knowledge and capability to be shared effectively across the portfolio providing significant benefits through combined drilling campaigns, shared technical resources and cost efficiencies.”
Chairman of KUTh, Bruce McKay, said: “Bringing the two companies together offers strong synergies and value for our shareholders who will continue to benefit from the development of our geothermal energy projects while gaining access to Geodynamics’ financial and technical capability required to progress the Takara Project.”
Further Transaction Details
The Offer will be implemented by way of an off-market takeover offer under the Australian Corporations Act. The consideration will be one (1) Geodynamics share for every five and a half (5.5) KUTh shares on issue (subject to rounding). The Offer extends to KUTh shares only.
Following implementation of the Offer KUTh is expected to become a wholly-owned subsidiary of Geodynamics, with current KUTh shareholders holding approximately 6.12% of the enlarged Geodynamics Group.
Geodynamics will invite a current KUTh director, Mr George Miltenyi, to join the Geodynamics’ Board, which will continue to be chaired by Keith Spence with Geoff Ward remaining as Managing Director and Chief Executive Officer. The remaining KUTh directors will step down from the KUTh Board on completion of the Offer.
Selected Conditions of the Takeover Bid Implementation Agreement
The Offer is subject to a number of conditions which are disclosed in full in the Takeover Bid Implementation Agreement (TBIA) attached to this announcement. Conditions include but are not limited to:
- minimum acceptance condition of 90% relevant interest in KUTh shares;
- no superior proposal;
- no material acquisitions or disposals by KUTh; and
- no material change to KUTh or Geodynamics.
A break fee of $50,000 in cash is payable by KUTh in the event (among other events) that the Offer is beaten by a countering offer, and payable by Geodynamics in the event that Geodynamics fails to proceed with the bid, except in certain circumstances. ”
Source: Geodynamics release by email