Highlands Natural Resources Regulatory News (HNR)

25 Sep 2006 07:00

Hardman Resources Limited25 September 2006 STOCK EXCHANGE / MEDIA RELEASE RELEASE DATE: 25 September 2006 (For immediate release) FOR FURTHER INFORMATION: MEDIA ENQUIRIES:Simon Potter Australia:Chief Executive Officer Jim Kelly, Paul Marriage+61 8 9261 7600 Third Person Communications +61 (0) 2 8298 6100Shareholder Information Line United Kingdom:1300 302 137 within Australia Patrick Handley, Deborah Spencer,+61 3 9415 4278 internationally Phoebe Buckland Brunswick Group LLP +44 (0) 20 7404 5959 A$1.47 BILLION RECOMMENDED OFFER FOR HARDMAN RESOURCES FROM TULLOW Hardman Resources Limited (ASX: HDR) today announced that it has entered into anagreement with Tullow Oil plc (LSE: TLW) for the proposed acquisition by Tullowof all of the shares in Hardman via a scheme of arrangement. The proposed transaction is subject to a number of conditions, including Hardmanshareholder approval. The attachment to this announcement sets out the key termsof the scheme implementation agreement. Under the Tullow offer, Hardman shareholders will receive A$2.02 (£0.7979)(1)cash per share, a 60 per cent premium to the Volume Weighted Average Price("VWAP") of Hardman's shares in the week prior to the agreement(2). This offervalues Hardman at A$1.471 billion (£581 million). Tullow will also provide a Share Alternative to Hardman shareholders who wish toparticipate in the combined group. Hardman shareholders may elect to receive0.22289 new Tullow shares for each Hardman share, subject to a maximum of 65million new Tullow shares. This Share Alternative is available for some or all of the shares owned by eachHardman shareholder. Any oversubscription to the Share Alternative will besubject to a scaleback pro-rata to the size of the elections made. The newTullow shares will not be listed on the ASX but will trade on the London StockExchange. The Hardman Board believes that the Tullow offer is in the best interests ofHardman shareholders. In the absence of a superior proposal, the Directorsunanimously recommend that Hardman shareholders vote in favour of the scheme ofarrangement and each of the Directors intends to vote any shares they hold infavour of the Tullow offer at the scheme meeting. The cash consideration of A$2.02 (£0.7979) represents a substantial premium of: - 56 per cent to the volume weighted average price ("VWAP") of A$1.29per Hardman share on 22 September 2006, being the last trading day on the ASXbefore this announcement; - 60 per cent to the one week VWAP of A$1.26 per Hardman share(3); and - 47 per cent to the one month VWAP of A$1.38 per Hardman share.(4) Hardman Chairman, Mr Robert Carroll, said: "We welcome Tullow's offer asrepresenting attractive value. The Board unanimously recommends this offer inthe absence of a superior proposal as we consider that it is in the bestinterests of our shareholders." An explanatory memorandum containing information relating to the proposedtransaction and reasons for the Directors' recommendation is expected to be sentto Hardman shareholders in mid November 2006. KPMG will be engaged to prepare an independent expert's report for Hardmanshareholders and provide its opinion as to whether the proposed transaction isin the best interests of Hardman shareholders. This report will be included inthe explanatory memorandum. The meeting at which Hardman shareholders will vote on the scheme of arrangementis expected to be held in mid December 2006 in Perth, Western Australia. Mr Simon Potter, Hardman's CEO & Managing Director, said: "Hardman has assembleda broad asset portfolio, comprising prospective exploration acreage, discoveriesto appraise, and potential developments, diversified both technically and byregion. Significantly, the company has also developed an operating capability,which together with high margin cashflow and a strong balance sheet, give itflexibility and control over the growth of those assets. "Tullow's offer, at an attractive premium to our recent share price, capturespotentially several years of the risked upside in our portfolio. Further, itprovides investors with the choice of certain value now via a cash offer or,through the scrip alternative, retaining exposure to the Hardman asset inventorywith the additional leverage offered by an E&P company of substantially greaterscale. "We know Tullow well through our joint venture in Uganda. It is a highlysuccessful E&P company with a strong exploration ethos, an excellent operationalrecord and a broad range of assets in Africa, Asia and OECD countries. The Boardhas concluded that Tullow's offer has the value and flexibility to appeal toHardman's varied shareholder base, and we recommend the offer to our investors." Hardman is being advised by Emerald Partners and Morgan Stanley as financialadvisers and Blake Dawson Waldron as legal advisers. The Company's house brokersin the UK are JP Morgan Cazenove and Oriel Securities. A Shareholder Information Line - 1300 302 137 within Australia and +61 3 94154278 internationally - has been established and will be fully operational from26 September 2006. About Hardman Hardman is an Australian Stock Exchange listed, international oil and gasexploration and production company headquartered in Perth, Australia. Thecompany has projects in Uganda, Tanzania, Falklands, Guyane and a major presencein the emerging petroleum province offshore Mauritania, West Africa. Hardman isalso listed on the Alternative Investment Market of the London Stock Exchange(LSE). www.hdr.com.au About Tullow Tullow is one of the largest independent oil and gas exploration and productioncompanies in Europe with a portfolio of licenses in 15 countries and over 200employees. The Group focuses on gas in the UK Southern North Sea, oil in Africa,and has ongoing appraisal and development in South Asia. At the time ofannouncement Tullow had a market capitalisation of £2.329 billion (A$5.896billion). Tullow is headquartered in London and listed on the main market of theLSE and the Irish Stock Exchange. www.tullowoil.com ATTACHMENT SCHEME IMPLEMENTATION AGREEMENT - SUMMARY OF KEY TERMSHardman and Tullow have entered into a Scheme Implementation Agreement dated25 September 2006 (SIA) in relation to a proposed scheme of arrangement forTullow or a subsidiary of Tullow to acquire all of the shares in Hardman(Scheme).The SIA sets out the obligations of Hardman and Tullow in relation to theScheme. A copy of the SIA will be set out in the Scheme Booklet that is to beprovided to Hardman shareholders prior to the Scheme meeting. A summary of someof the key terms of the SIA is set out below. 1. Conditions precedent Implementation of the Scheme is subject to a number of conditions precedentwhich must be satisfied before the Second Court Date, including the following: a) Regulatory Approvals: FIRB approval. b) Shareholder approval: Hardman Shareholders approving the Scheme at ageneral meeting. The resolution for the Scheme must be passed by a majority innumber of the shareholders present and voting (in person or by proxy), whosevotes represent at least 75% of the total votes cast at the meeting. c) Restraints: there being no temporary restraining order, preliminary orpermanent injunction or other order issued by any court of competentjurisdiction or other material legal restraint or prohibition preventing thetransaction from proceeding. d) Hardman Material Adverse Change: there being no one or more changes,events, occurrences or matters which (whether individually or when aggregatedwith all such changes, events, occurrences or matters of a like kind) has had oris likely to have: 1) the effect of a diminution in the consolidated net assets of theHardman Group, taken as a whole (calculated on the basis of AIFRS), of at least$50,000,000 when compared to the consolidated net assets of the Hardman Group asshown in Hardman's Interim Report as at 30 June 2006; or 2) the result that Hardman is unable to carry on its business insubstantially the same manner as it is currently carried on, in either case, other than as a consequence of: • changes in oil prices or currency exchange rates; or • any revision to the estimated oil reserves of the Chinguetti oil field that it is not materially different to that previously announced by Hardman on 23 August 2006; or • write-offs of exploration costs in the ordinary course of business or the incurring of depreciation charges in the ordinary course of business; or • losses covered by insurance which Hardman's insurer has agreed in writing to pay. e) Hardman Prescribed Occurrence: there being no "Hardman PrescribedOccurrence" (which include the events listed in Section 652C of the CorporationsAct, certain corporate restructures, material acquisitions, disposals,restraints, financial encumbrances and financial commitments, related partytransactions, hedging and insolvency events) by Hardman, and in certaincircumstances, it subsidiaries. f) Tullow Prescribed Occurrence: there being no "Tullow PrescribedOccurrence" which includes certain capital restructures and insolvency events inrespect of Tullow. g) Court approval: the Court approving the Scheme. 2. No-Talk, No-Shop and change in recommendation Under the agreement, Hardman has agreed that from the date of the SIA until itstermination or the end date: a) No Talk: it must ensure that neither it nor any of its subsidiaries,nor any of their respective directors, employees, officers or agents (includingfor the avoidance of doubt any Financial Advisers) directly or indirectlyparticipate in any negotiations or discussions, provide or make available anyinformation (including by way of providing information and access to perform duediligence), or communicate any intention to do any of these things, in respectof or in response to any expression of interest, offer or proposal by any personin relation to any Competing Transaction (as defined in paragraph 3(a) below). b) No Shop: it must ensure that neither it nor any of its subsidiaries,nor any of their respective directors, employees, officers or agents (includingfor the avoidance of doubt any Financial Advisers) directly or indirectlysolicit, encourage (including by way of providing information concerning Hardmanto any person), initiate or communicate any intention to do any of these things,in respect of or in response to any expression of interest, offer or proposal byany person in relation to any Competing Transaction (as defined in paragraph 3(a) below). c) Fiduciary carve out: nothing in the No Shop or No Talk provisionsprevents Hardman from undertaking an act otherwise prohibited by the No Talkprovision if not undertaking that act would, in the written opinion of a Queen'sCounsel or Senior Counsel, involve a breach of the fiduciary duties owed by anyHardman director or would otherwise be unlawful. Prior to undertaking an actotherwise prohibited by the No Talk provision, that is permitted by thefiduciary carve out Hardman must: 1) obtain, and provide Tullow with a copy of, the written Queen's Counselor Senior Counsel's legal opinion; and 2) not, and ensure that none of its Representatives undertake any suchprohibited act until the end of the next Business Day after the provision of thewritten Queen's Counsel or Senior Counsel's legal opinion. d) Notification of approaches: Hardman must notify Tullow immediately ifit, or any of its Representatives becomes aware of any: 1) negotiations or discussions; 2) approach or attempt to initiate any negotiations or discussions; or 3) intention to make such an approach or attempt to initiate anynegotiations or discussions, in respect of any expression of interest, offer or proposal of a kind referredto in paragraphs 2(a) and 2(b) above and prior to doing an act referred to inparagraph 2(a) (which acts are only permitted to be undertaken pursuant to thefiduciary carve out mechanism set out in paragraph 2(c) above) Hardman mustimmediately provide in writing to Tullow the identity of the relevant person orpersons and details of such expression of interest, offer or proposal (includingcopies of, and updates in relation to, any expressions of interest, offer orproposals). e) Change of recommendation: Hardman must notify Tullow 3 Business Daysprior to announcing any change in recommendation and must consult with Tullow ingood faith for those 3 days to consider if the recommendation in place at thattime can be reinstated. 3. Reimbursement Fee a) Hardman has agreed to pay a reimbursement fee to Tullow, equal toAUD$14,711,694 if: 1) the Hardman Board withdraws or modifies its recommendation that HardmanShareholders vote in favour of the Scheme or makes a public statement indicatingthat it no longer supports the Transaction or that it supports some othertransaction, unless there has been a Tullow Prescribed Occurrence prior to thatchange, withdrawal or modification and Hardman has commenced the process ofterminating this agreement on the basis of the Tullow Prescribed Occurrence; or 2) a Competing Transaction (as defined below) is announced by a thirdparty and that third party gains a relevant interest in at least 50% of Hardmanshares or acquires, acquires control or merges with Hardman within 12 months ofthe announcement of the Competing Transaction; or 3) Hardman is in breach of its obligations under the No Shop and No Talkprovisions; or 4) the SIA is terminated by Tullow as a result of a Hardman PrescribedOccurrence occurring prior to the Second Court Date, or pursuant to a materialbreach of the SIA or a breach of representation or warranty (subject to themateriality set out in paragraph 4(a) below), Hardman must within three Business Days after receiving a written demand fromTullow pay to Tullow, without set-off or withholding, the reimbursement fee. Thedemand may only be made after the occurrence of an event referred to above inparagraphs (a)(1) to (a)(4). Hardman can only ever be liable to pay thereimbursement fee once. b) A Competing Transaction means a transaction or arrangement pursuant towhich a third party will, if the transaction or arrangement is entered into orcompleted: 1) acquire (whether directly or indirectly) or become the holder of, orotherwise acquire, have a right to acquire or have an economic interest in allor a substantial part of the business of the Hardman Group; 2) acquire a relevant interest in, become the holder of, or otherwiseacquire, have a right to acquire or have an economic interest in 5% or more ofHardman's voting shares; 3) acquire control (as determined in accordance with section 50AA of theCorporations Act) of Hardman; 4) otherwise acquire or merge with Hardman; or 5) enter into any agreement, arrangement or understanding requiringHardman to abandon, or otherwise fail to proceed with the transaction, whether by way of takeover offer, scheme of arrangement, shareholder approvedacquisition, capital reduction or buy back, sale or purchase of shares orassets, joint venture, dual-listed company structure (or other synthetic merger)or other transaction or arrangement. c) Prior to the Hardman Board modifying or changing its recommendation inaccordance with the terms of the SIA, Hardman must appoint an escrow agent tohold the Reimbursement Fee in escrow on trust for Tullow on commerciallyreasonable terms and pay an amount equal to the Reimbursement Fee into theescrow account. 4. Termination The SIA may be terminated at any time prior to the Second Court Date in certaincircumstances: a) by either party if: 1) the other party is in breach of any material provision of the SIA otherthan in respect of a breach of either a representation or warranty; 2) the other party is in material breach of a representation or warrantyand the loss that flows from the breach is greater than $30 million, in the caseof a breach by Hardman and $120 million the case of a breach by Tullow; 3) a court or government agency has taken any action permanentlyrestraining or otherwise prohibiting the Scheme from proceeding or has refusedto do any thing necessary to permit the Transaction Scheme to proceed (and theaction or refusal has become final and cannot be appealed); or 4) a condition precedent is not satisfied and Hardman and Tullow cannotreach agreement to proceed by way of alternative means, b) by Tullow if: 1) the Hardman Board changes, withdraws or modifies its recommendationthat Hardman Shareholders vote in favour of the Scheme or makes a publicstatement indicating that it no longer supports the transaction; or 2) Hardman is in breach of its obligations under the No-Shop and No-Talkprovisions; and c) by Hardman if, following 21 days notice to Tullow, the Hardman Boardhas changed, withdrawn or modified its recommendation in accordance with theterms of the SIA and by the end of the 21 day notice period the recommendationhas not been reinstated the reimbursement fee has been paid to Tullow. --------------------------(1) Based on an exchange rate of £1 = A$2.5315(2) Based on the five trading days to, and including, 22 September, 2006, beingthe last trading day prior to the agreement being reached(3) VWAPs calculated to the close of trading on 22 September, 2006. Thecalculation of the VWAP is based on trading on the ASX only(4) VWAPs calculated to the close of trading on 22 September, 2006. Thecalculation of the VWAP is based on trading on the ASX only This information is provided by RNS The company news service from the London Stock Exchange