Oando, Exile Resources announce proposed acquisition
By Daniel Osunkoya
August 3, 2011 12:06AM
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The management of Oando Plc, an integrated energy group, yesterday notified the Nigerian Stock Exchange of the proposed acquisition and financing agreement between the company and Exile Resources Inc.

Exile Resources Inc. is a Canada-based public company currently engaged in the exploration, development and production of petroleum and natural gas in Turkey, Nigeria, and Zambia. Exile and Oando are joint venture partners on Exile’s Akepo oil field, located in Nigeria.

Oando, in a statement on Tuesday, said the two companies “are pleased to announce that they have entered into a term sheet dated July 28, 2011, providing for, subject to the completion of satisfactory due diligence by both parties and other conditions, the acquisition by Exile of certain interests of Oando in respect of Oil Mining Leases and Oil Prospecting Licenses (Upstream Assets) in exchange for 100 million post-consolidation common shares in the capital of Exile.”

The statement noted that the parties have agreed to negotiate exclusively with each other in good faith and use their reasonable efforts to negotiate a definitive agreement to give effect to the Acquisition on or prior to September 30, 2011.

“The manner in which the acquisition will be completed will be determined after each party has had an opportunity to complete its due diligence and consider all applicable tax, securities and other laws,” it stated.

Stan Bharti, Exile’s chairman, said, “We are very excited about this proposed transaction with Oando to build the leading indigenous upstream oil and gas company in Africa and believe this will produce great value for our Exile shareholders.”

http://234next.com/csp/cms/sites/Next/Money/5736819-147/story.csp

The way the deal is structured is kind of weird to me. Seems more like a merger of sorts than acquisition? I don't completely get it.

Shio.
Why upstream?

ekt_bear:

The way the deal is structured is kind of weird to me. Seems more like a merger of sorts than acquisition? I don't completely get it.

IMO, this is an acquisition and from the news reports you posted, I think Exile is acquiring Oando not Oando acquiring exile. Here is an excerpt to support my opinion;

Oando, in a statement on Tuesday, said the two companies[b] “are pleased to announce that they have entered into a term sheet dated July 28, 2011, providing for, subject to the completion of satisfactory due diligence by both parties and other conditions, the acquisition by Exile of certain interests of Oando in respect of Oil Mining Leases and Oil Prospecting Licenses (Upstream Assets) in exchange for 100 million post-consolidation common shares in the capital of Exile.”[/b]

The " Term Sheet" in finance is a funding offer from a capital provider (investor, acquisition, banks etc) to the supposed party (the entity is needing funding). This is somewhat contractual and is a binding agreement between parties that each will live up to the "terms" stated in the sheet. The sheet can include number of shares, types and sources of funding et al and how the receiver is willing to work up the measured goals per the terms. With that being said, both parties entered into a "term sheet" but it did not specify who; however, the acquisition "[size=16pt]BY [/size]" Exile NOT OF Exile shows that Exile is the one acquiring "certain interest of Oando. It goes further to say with respects to these interest ; it stated " the acquisition by Exile of certain interests of Oando in respect of Oil Mining Leases and Oil Prospecting Licenses (Upstream Assets)" so Exile is acquiring certain interests of Oando's Oil Mining and Oil Prospecting Licenses, that will provide capital to Oando through the of exchange of common shares. Oando will receive 100million common shares post consolidation (after acquisition) more so for investors.

In other words, Exile isn't necessarily paying cash for these "certain rights", they are paying using their 100million common shares. I'm guessing, based on market value of each share of Exile (amount Oando's shareholders are willing to accept) x 100million will = the market value of these "certain Oil rights" of Oando's. Due to the fact is Oando's, when that 100million is transferred to them, they may choose to liquidate it, or withhold onto it. Besides, most large corporations buy out other large companies using stock rather than cash methods that way it's a lot stress free on both sides. I hope I was able to explain why I believe otherwise; Exile is acquiring Oando and not Oando acquiring Exile.

ola olabiy:

Shio.
Why upstream?

See JAMB question.
Where do you make the most profit in the oil business? Where else can it cost you 35 dolls per barrel to extract oil and you can end up selling for 100 to 140 dolls.
Even in the US where the downstream sector is so robust, it is not so attractive to the oil companies. Black gold is where the money is at. You make peanuts dealing in "gasoline, petrol and other end products"
Crude oil on the other hand "upstream exp and prod" is a win win situation.

manny, you are right. They are basically selling off some assets in exchange for stock, it looks like:

http://www.winnipegfreepress.com/business/breakingnews/126587548.html

Above article is a lot clearer.

phuck_NL:

See JAMB question.
Where do you make the most profit in the oil business? Where else can it cost you 35 dolls per barrel to extract oil and you can end up selling for 100 to 140 dolls.
Even in the US where the downstream sector is so robust, it is not so attractive to the oil companies. Black gold is where the money is at. You make peanuts dealing in "gasoline, petrol and other end products"
Crude oil on the other hand "upstream exp and prod" is a win win situation.

I know jare.
Just mocking Oando.

At the end of the day, Oyinbos will get the main thing they want - crude oil; exploration.

Bad deal!

I think it is an acquisition by Oando, exile is very small when compared to oando. The business combination is between the exploration and production arm of Oando and exile.
I am of the opinion that the deal will enable Oando to have access to cheap capital from from Canada. Let us wait and see what will happen at the end of this financial year. Any how we look at it, Oando is grossly under-valued at N42 ( Forty Naira}

^^^

Why do people always assume small efficient companies cant buy out 'larger' companies? anyway

TORONTO - Exile Resources Inc. (TSXV:ERI) has struck a deal to buy oil exploration licences in Nigeria from Oando PLC , a Nigerian-based energy company.

In return, Exile said Tuesday, the Canadian company will pay 100 million of its shares to Oando after a planned share consolidation.

The leases are a combination of producing, development and appraisal and exploration assets and focus on oilfields onshore and offshore Nigeria.

"We are very excited about this proposed transaction with Oando to build the leading indigenous upstream oil and gas company in Africa and believe this will produce great value for our Exile shareholders," Stan Bharti, Exile's chairman, said in a release.

The deal is subject to a definitive agreement, which the two companies will try to negotiate.

Exile and Oando are joint venture partners on Exile's Akepo oilfield in Nigeria.

In trading on the TSX Venture Exchange, Exile shares fell 1.5 cents to 7.5 cents, a drop of 16.7 per cent.

I like Nigerian newspapers sha, they are very 'erm' patriotic and they usually just print what the company sent them direct!

Oando, in a statement on Tuesday, said the two companies “are pleased to announce that they have entered into a term sheet dated July 28, 2011, providing for, subject to the completion of satisfactory due diligence by both parties and other conditions, [b]the acquisition by Exile of certain interests of Oando in respect of Oil Mining Leases and Oil Prospecting Licenses (Upstream Assets) in exchange for 100 million [/b]post-consolidation common shares in the capital of Exile.”

perhaps just an exchange, exile will do upstream, oando will get more money to strengthen their core operations

Exile is buying oil leases and license from Oando. Oando is getting a fraction of the company Exile. Meaning, Oando now has a stake in Exile. Simple.

nice

atleast if they are not wanted in nigeria, others want them

phuck_NL:

See JAMB question.
Where do you make the most profit in the oil business? Where else can it cost you 35 dolls per barrel to extract oil and you can end up selling for 100 to 140 dolls.
Even in the US where the downstream sector is so robust, it is not so attractive to the oil companies. Black gold is where the money is at. You make peanuts dealing in "gasoline, petrol and other end products"
Crude oil on the other hand "upstream exp and prod" is a win win situation.

$35 dollars where be that? in Nigeria it costs less than $10 while in Saudi Arabia it costs about $2

It is very clear that Oando is acquiring Exile. Exile is only buying the "Oil Mining Leases and Oil Prospecting Licenses (Upstream Assets)" from Oando while Oando has 100 million common share in Exile's "overall" asset and depending on what the company is currently worth, this might give Oando a controlling interest in the company (Exile).

(Just found this out)
And has it stands, the company's last balance sheet shows that the company is worth $11.8m and If the company is being traded at 7.5 cent then Oando's stake is worth $7.5m which apparently is more than 60% of the company and automatically hands Oando the control of the company. Oando is worth more the $2B by the way.

^ thanks

The acquisition is structured such that it may be mutually beneficial to both companies. Oando will inject capital into Exile by way of purchasing a 75% stake in their current 40% holding of the Akepo field. Exile will focus on the development of its upstream assets after this. When the restructuring is complete, Oando's GCEO (Jubril Wale Tinubu) will become the Chairman of the Exile board.

More details on http://www.exileresources.com/press_pdf/2011-07.pdf