The board of directors of Sound Energy (AIM: SOU), the energy transition company, notes the recent announcement by Angus Energy (“Angus”) of the commencement of a strategic review and formal sale process pursuant to the relevant requirements of the Code and announces that it is evaluating a possible all-share offer for the entire issued and to be issued share capital of Angus (the “Possible Offer” to form the “Combined Group”).
Sound Energy confirms that it has previously made indicative proposals to Angus regarding a potential all-share combination (the “PotentialCombination”). The board of directors of Angus (the “Angus Board”) unequivocally rejected the indicative proposals.
Indicative proposals
Sound Energy has submitted three non-binding indicative proposals of 1.00 pence per Angus share, 1.30 pence per Angus share and 1.40 pence per Angus share to Angus’s Chairman and Managing Director on 18 December 2021, 30 December 2021 and 5 January 2022 respectively, such possible consideration to be satisfied by the issuance of Sound Energy shares to Angus shareholders. These proposals represent premiums of approximately 54%, 100% and 115% respectively to the closing share price of 0.65 pence per Angus share on 17 December 2021, being the last business day immediately prior to Sound Energy’s initial proposal. Each of these proposals was unequivocally rejected by the Angus Board. On 14 January 2022, Gneiss Energy Limited, in its capacity as financial adviser to Sound Energy, made a further formal approach orally to the Managing Director of Angus and Beaumont Cornish Limited, financial adviser to Angus, confirming the terms of the Possible Offer (which are described below) and noted Sound Energy’s desire to proceed with the Possible Offer on the basis of a recommendation from the Angus Board.
Transaction rationale
The Company has evaluated this Potential Combination for some time and believes that the Potential Combination would be a strategically compelling proposition.
Sound Energy believes the Potential Combination would represent the combination of two complementary businesses, with attractive onshore gas developments in high gas price jurisdictions.
The board of directors of Sound Energy (the “Sound Energy Board”) consider that the Potential Combination would create a more effective operating entity and an enlarged business with substantial capabilities that would be greater than the sum of the two parts.
The Potential Combination would allow both the Company’s and Angus’s shareholders to participate in any future value generated by the Combined Group and its more diversified portfolio.
Specifically, the Sound Energy Directors believe that a combination with Angus would provide the Combined Group with the following key benefits:
1. An enlarged platform for investment and growth;
2. A larger portfolio with diversification across sectors and maturity of assets;
3. The potential to deliver multiple projects for the Combined Group’s shareholders; and
4. An experienced team with complementary industry backgrounds.
The strategy of Sound Energy has been to actively further the energy transition. The focus of the Sound Energy Board has been on the development of gas assets in jurisdictions where high gas pricing, attractive fiscal terms and a beneficial regulatory environment are supportive to project development.
The Possible Offer
The terms of the Possible Offer would comprise the issue of 0.680 Sound Energy ordinary shares for each Angus ordinary share (the “Exchange Ratio”) (subject to the reservations set out below). By way of example, the Exchange Ratio represents a value of approximately 1.50 pence per Angus share based on a closing price of 2.20 pence per Sound Energy share on 17 January 2022, being the last business day immediately prior to the date of this announcement.
At the value of 1.50 pence per Angus share implied by the Exchange Ratio, the Possible Offer, if made, would represent a premium of approximately:
· 93 per cent. to the Angus closing price of 0.775 pence per share on 5 January 2022, being the last business day immediately prior to the announcement by Angus of the commencement of a strategic review and formal sale process;
· 111 per cent. to the volume weighted average price for Angus shares over the two-month period ended on and including 5 January 2022, being 0.709 pence per share; and
· 32 per cent. to the Angus closing price of 1.13 pence per share on 17 January 2022, being the last business day immediately prior to the date of this announcement.
The Exchange Ratio would give an implied value for the entire existing issued and to be issued share capital of Angus of approximately £21.6 million (based on a closing price of 2.20 pence per Sound Energy share on 17 January 2022, being the last business day immediately prior to the date of this announcement).
Under the terms of the Possible Offer, it is expected that Angus shareholders would own approximately 38 per cent. of the Combined Group, and Sound Energy shareholders would own approximately 62 per cent. of the Combined Group.
Given the Possible Offer is proposed to be structured as an all-share offer, Sound Energy is currently only minded to proceed with the Possible Offer on the pre-condition that a recommendation from the Angus Board is ultimately forthcoming. This pre-condition can be waived by Sound Energy, and further pre-conditions are set out below.
Sound Energy has received support for the Possible Offer from Angus shareholders in respect of a total of 152,203,626 Angus shares, representing, in aggregate, 13.92 per cent. of Angus’s issued share capital as at 17 January 2022 (being the last business day immediately prior to the date of this announcement). Further details of the irrevocable undertaking and letters of intent are set out in Schedule 1.
The Sound Energy Directors look forward to constructive engagement with Angus regarding the Possible Offer.
At this stage, there can be no certainty that an offer will be made.
An announcement of a firm intention to make an offer by Sound Energy under Rule 2.7 of the Code remains subject to the satisfaction or waiver of a number of pre-conditions, namely satisfactory completion of customary due diligence by Sound Energy, a recommendation from the Angus Board as well as final approval by the Sound Energy Board. Sound Energy reserves the right in its absolute discretion to waive any or all of these pre-conditions, in whole or in part.
Pursuant to Rule 2.5 of the Code, the Company reserves the right to introduce other forms of consideration and/or vary the mix or composition of consideration of any offer. The Company also reserves the right to make any offer on less favourable terms than those set out in this announcement:
i. with the agreement of the Angus Board;
ii. if a firm offer or possible offer for Angus is announced by a third party; or
iii. following the announcement by Angus of a whitewash transaction pursuant to the Code.
In the event Angus announces, declares, pays or makes any dividend or distribution to Angus shareholders after the date of this announcement, Sound Energy reserves the right to make an equivalent reduction in the terms of the Possible Offer.
Further announcements will be made as appropriate.
Under Rule 2.6(a) of the Code, Sound Energy must, by 5:00pm on 15 February 2022, either announce a firm intention to make an offer for Angus in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for Angus, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline will only be extended with the consent of the Panel on Takeovers and Mergers (the “Panel”) in accordance with Rule 2.6(c) of the Code.
This is an announcement falling under Rule 2.4 of the Code and does not constitute an announcement of a firm intention to make an offer under Rule 2.7 of the Code.
The person responsible for arranging release of this announcement on behalf of the Company is Graham Lyon.
Rule 2.9
In accordance with Rule 2.9 of the Code, the Company confirms that as at close of business on 17 January 2022, the issued share capital of the Company comprises 1,629,183,907 ordinary shares of 1 pence each, with ISIN: GB00B90XFF12. The Company does not hold any shares in treasury.
For further information, please contact:
Sound Energy plc
Graham Lyon, Executive Chairman
