G3 Exploration Regulatory News (G3E)

28 Mar 2008 07:00

Green Dragon Gas Ltd27 March 2008 27 March 2008 GREEN DRAGON GAS LTD. ("Green Dragon" or the "Company") Green Dragon Executes Agreement to Acquire Pacific Asia China Energy Inc. Green Dragon Gas Ltd. (AIM: GDG), today announced that it has entered into aconditional agreement with Pacific Asia China Energy Inc. ("Pace") through its wholly owned subsidiary, Greka China Ltd. ("Greka") to acquire Pace. Pace is a Vancouver listed public company with operations exclusively in Chinafocused on Coal Bed Methane ("CBM") through a Production Sharing Contract (PSC)covering a 946 sq km block in Guizhou province with CUCBM. Additionally, Pacehas a 50 per cent interest in a joint venture drilling service company withexclusive rights to utilize Mitchell Drilling's Dymaxion horizontal drillingtechnology in China for de-gassing coal mines and exploiting CBM. MitchellDrilling is one of Australia's most established CBM drilling contractors with aspecialization in horizontal drilling. Pace's website www.pace-energy.comprovides further details of its operations. Following the acquisition Pace'soffices in Canada will be closed, its Beijing offices will be consolidated withGreka's while Kunming will continue as a regional office to manage the PSC. Greka, through a wholly-owned British Columbia subsidiary, subject to completionof due diligence, will acquire all of Pace's outstanding shares at a price of$0.38 per share in cash (the "Transaction"). The total value of the Transactionis approximately CDN $35.18 million. This all-cash Transaction for 100 percentof Pace's shares represents a 58 per cent premium to Pace's closing price onMarch 26, 2008. In the nine months ending 30 November 2007, Pace made a net loss of CDN $4.1million and its net assets at that date were CDN $19.6 million (unaudited).The acquisition will be funded from Green Dragon's existing cash resources and/or from the proceeds of the issue of new shares or through the issue of debt. The Transaction has been unanimously approved by the Pace Board of Directors.Pace's Board of Directors has also resolved to recommend to their shareholdersthat they vote in favour of the Transaction. In determining to recommend theTransaction to Pace's shareholders, Pace Board of Directors considered a numberof factors and engaged Haywood Securities Inc. ("Haywood") to prepare a fairnessopinion in relation to the Transaction. Haywood has provided a fairness opinionto the Board of Directors of Pace indicating that, subject to its review of allformal documentation and subject to the assumptions and conditions set forth insuch opinion, the consideration to be received by Pace shareholders is fair froma financial point of view. The Transaction will be carried out by way of a statutory plan of arrangementunder Section 288 of the Business Corporations Act (British Columbia), and mustbe approved by the applicable court and by 66 2/3 per cent of the votes cast byholders of Pace's shares. All warrants and options of Pace are to be cancelledunder the plan of arrangement and the arrangement is also subject to approval by66 2/3 per cent of votes cast by all holders of warrants, options and shares voting as a single class. The completion of the Transaction is also subject tocustomary closing conditions, including regulatory approvals and completion ofsatisfactory due diligence by Greka. The Transaction is expected to close in May2008, shortly after receipt of shareholder and court approvals. Details regarding these and other terms of the Transaction are set out in theArrangement Agreement, which will be filed by Pace on SEDAR and will beavailable on the SEDAR website at www.sedar.com and by the Company on itswebsite. Further information regarding the Transaction will be contained in aproxy circular that Pace will mail to holders of its common shares in connectionwith the special meeting of shareholders to be held to approve the Transaction.It is expected that these materials will be mailed in late April 2008 for ameeting to be held in late May 2008. Once mailed, the proxy circular will beavailable at www.sedar.com and on the Company's website. Pace's directors and officers, who collectively hold approximately 25 per centof the outstanding common shares of Pace, have entered into lock up agreementswith Greka to vote their shares in favour of the Transaction, subject to theirability to withdraw such support in the event that the Arrangement Agreement isterminated. Mr. Randeep S. Grewal, Green Dragon's Chairman & CEO stated "This timelyacquisition is accretive to the Company and its shareholders as we continue toexpand our operations and further enhance our position within the emerging CBMindustry in China. The acquisition will provide us with complementary sets ofassets to the Company's current operations. The additional 946 sq km CBM block in Guizhou provides a new focus area within the central inner China niche built by the Company to date. Furthermore, this acquisition increases our PSC acreage to 7,566 sq km making GDG the largest foreign CBM operator in China. Additionally, the Pace-Mitchell joint venture adds two Schramm rigs to the fleet of five ordered by Greka Technical Services providing commonality within rigs while enhancing the capability to drill horizontal wells. The interchangeability will ease the cross-training of personnel and optimize the rig utilization enabling the Company to capitalize on its significant drilling inventory." "I look forward to the addition of the China based Pace employees and managementto the Greka China team. We expect the complementary nature of the assetaccretion to provide for a similar growth in the employee base with noredundancies within the China based employees. We expect to maintain a seamlesstransition to the continuity of the Guizhou PSC development from its currentexploration stage onto commercialization" Mr Grewal added. For further information on the Company and its activities, please refer to thewebsite at www.greendragongas.com or contact: Randeep S. Grewal Tim Thompson / Nick MelsonBetty Cheung Investor RelationsGreen Dragon Gas Buchanan Communications+852 3710 0168 +44 20 7466 5000 Dr Azhic Basirov/ David JonesNominated Adviser & BrokerSmith & Williamson Corporate Finance Limited+44 20 7131 4000 This information is provided by RNS The company news service from the London Stock Exchange