(Alliance News) - Baron Oil PLC on Tuesday said its reverse takeover of SundaGas Holdings Pte Ltd has been terminated due to restructuring concerns and capital requirement "uncertainties".
SundaGas's parent company, SundaGas Pte Ltd, is based in Singapore and has a portfolio of operated oil and gas projects located in south east Asia.
In November, Baron said it had agreed to issue two of its own shares for every one SundaGas share, creating a new company of which Baron shareholders would own 33% and SundaGas shareholders the rest.
However, this plan has now been abandoned due to "uncertainties around the potential capital requirements of the combined group, along with complications in relation to the required restructuring of the SundaGas subsidiaries".
Because of these uncertainties, the merger would be more costly than expected, and there would be a "material risk" of the reverse takeover failing to complete in time to prevent Baron's shares being cancelled.
This is because the deal was considered a reverse takeover under AIM rules, so Baron's shares were suspended. However, AIM rules also require that shares be cancelled if they are suspended for six months, imposing a deadline on the merger completion.
With the merger abandoned, Baron's shares have resumed trading and were down 28% at 0.087 pence in London on Tuesday at midday.
Baron said it will now go back to developing its portfolio as an independent exploration firm. These consist of an entitlement to invest with SundaGas in the Chuditch gas accumulation offshore Timor-Leste plus "a near-term drilling opportunity in Peru " and UK assets with potentially "substantial prospective resources".
Baron Executive Chair Malcolm Butler said: "Baron and SundaGas have agreed jointly that the uncertainties that have arisen involve risks to the completion of the [reverse takeover] that do not justify continuation of the process.
"However, Baron's shareholders will still benefit from the company's entitlement to invest in a one third shareholding in [SundaGas (Timor-Leste Sahul) Pte Ltd], equating to a 25% indirect interest in the highly prospective Chuditch [petroleum sharing contract]. In addition, Baron will retain its full existing interests in Peru and the UK and will continue to operate on a low overhead basis."
"The board continues to be very excited by the potential value that can be crystallised by investing in the Chuditch PSC, both in its initial phases via seismic reprocessing, and thereafter as part of an appraisal and exploration drilling programme. We look forward to updating shareholders on all our projects in due course, including the provisional plans to drill in Peru later this year."
By Anna Farley; annafarley@alliancenews.com
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Baron Oil (BOIL)