Ram Power signs LOI on acquisition of Sierra Geothermal Power
Sierra Geothermal Power Corp. and Ram Power Corp. enter into a non-binding letter of intent to the potential acquisition by Ram Power of all of the outstanding common shares of Sierra.
In a release just a few moments ago, “Sierra Geothermal Power Corp. (TSXV:SRA) (“Sierra”) and Ram Power Corp. (TSX:RPG) (“Ram Power”) announce that they have entered into a non-binding letter of intent in relation to the potential acquisition by Ram Power of all of the outstanding common shares of Sierra.
The letter of intent contemplates the acquisition by Ram Power of all of Sierra’s outstanding common shares by way of a share exchange whereby holders of outstanding Sierra shares would receive 1 common share of Ram Power for every 12 common shares of Sierra. All outstanding options and warrants to purchase Sierra shares will be exchanged under the transaction for options and warrants to purchase common shares of Ram Power in accordance with the exchange ratio. The transaction will result in the issuance of approximately 11.125 million common shares of Ram Power to shareholders of Sierra.
Based on the exchange ratio and Ram Power’s May 28, 2010 closing share price of $2.56, the implied offer price of $0.213 per Sierra share represents an 18.5% premium to its May 28, 2010 closing share price of $0.18 and a premium of 19.9% to Sierra’s 20-day volume weighted average price of $0.178.
The benefits of the transaction include:
- Allows shareholders of Sierra to recognize an attractive premium to the existing Sierra share price, while obtaining an interest in Ram Power’s broader portfolio of operating, in-construction, and development geothermal assets.
- Shareholders of Sierra will become shareholders of Ram Power, with its experienced management team and strong balance sheet;
- Increases Ram Power’s footprint in Nevada, one of the premier regions for geothermal development in the United States;
- Potential for synergistic development of a power cluster in Esmeralda County, Nevada as Ram Power’s Clayton Valley land positions are contiguous to Sierra’s Paymaster District projects: Alum, Silver Peak and Pearl;
- Acquired projects improve the ability of Ram Power to deliver additional power under its existing power purchase agreement with NV Energy;
- Continuance of the consolidation process underway in the geothermal industry and the enhancement of Ram Power’s position as a market leader amongst independent geothermal energy companies.
The parties expect to enter into definitive agreements in relation to the transaction towards the end of June 2010, subject to negotiation of mutually satisfactory terms, completion of confirmatory due diligence and the receipt of lock-up commitments in favour of the transaction from Sierra’s largest shareholders. In addition, the closing of any transaction will be conditional upon receipt of any required regulatory and shareholder approvals. Under the letter of intent, Ram Power and Sierra have agreed to negotiate exclusively in order to complete confirmatory due diligence and negotiate definitive agreements.
Gary Thompson, SGP’s President, Chief Executive Officer and Executive Director stated, “We are pleased that our formal strategic process led by Jacob Securities Inc. has resulted in a transformative transaction for Sierra shareholders. We believe that Sierra shareholders will benefit from this transaction by merging into a well capitalized geothermal company such as Ram Power. The transaction has the full support of the Sierra Board of Directors, Special Committee, and Management who will be working closely with Ram Power over the coming weeks to finalize and execute definitive agreements.”
Hezy Ram, Chief Executive Officer for Ram Power stated, “We are very pleased about the letter of intent with Sierra. This transaction comes as a continuation of our strategy to create a renewable energy company of scale, with the skilled management and capital in place to execute on our projects.”
Source: Company announcement via e-mail (Sierra Geothermal Power)