Australia's Vintage Energy, Galilee Energy announce merger proposal
Australian gas companies Vintage Energy and Galilee Energy on August 15 announced that they have entered into a binding Heads of Agreement (HoA), under which Vintage will acquire Galilee in an all-scrip deal.
Under the terms of the scheme, Galilee shareholders will receive two fully paid ordinary shares in Vintage for every one fully paid ordinary Galilee share held on the scheme record date.
The 100% scrip scheme consideration implies a share price of A$0.02 ($0.013) for Galilee, based on the closing price of Vintage shares at A$0.01 on August 12, the last day both companies traded on the ASX before Galilee entered a trading halt.
The companies stated that the merger will create a more robust entity, better equipped to supply gas to eastern Australia in both the near and long term. The combined entity would benefit from existing appraisal gas production, 2P reserves of approximately 50 PJ, and long-term sales contracts, along with the large unconventional 2,500 PJ 2C Glenaras gas resource.
The Galilee board has unanimously recommended the proposal, in the absence of a superior offer. The Vintage board has also unanimously supported the proposal.
Galilee plans to raise A$2.66mn through a fully underwritten placement and entitlement offer. The increased cash resources resulting from the merger are expected to provide near-term benefits, focusing on the progression of the Odin and Vali gas projects, both of which are currently supplying gas under long-term contracts.
Galilee executive chairman Ray Shorrocks commented, "There is a significant opportunity emerging in Australia's east coast gas market. This merger aims to position the combined companies and their shareholders to fully capitalize on the looming gas shortfall and its impact on gas prices, margins, and free cash flow generation."
The boards of the two companies have directed that a scheme implementation deed be prepared and expedited, along with other relevant materials for agreement between the parties and consideration and approval by Galilee shareholders.
"The merger will create a company with much greater exposure to east coast gas supply in both the near and long term, supported by a stronger balance sheet. For Vintage shareholders, it means their company will be better equipped to grow production and revenue from the appraisal of the Odin and Vali gas fields. Additionally, our long-term prospects will be enhanced through the addition of Galilee's substantial gas resources,” Vintage chairman Reg Nelson added.