TIDMSRON
RNS Number : 7817S
Saffron Energy PLC
05 October 2017
5 October 2017
Saffron Energy Plc
("Saffron Energy" or the "Company")
Heads of Terms for the combination of Saffron Energy Plc with Po
Valley Operations
and Sound Energy Italy
Enlarged group to be renamed Coro Energy Plc
Saffron Energy (LON: SRON) the AIM quoted European natural gas
company with interests in Northern Italy, is pleased to announce
that it has entered into non-binding conditional heads of terms
(the "Heads of Terms") with Sound Energy Plc ("Sound Energy") and
Po Valley Energy Limited ("Po Valley") under which it is proposed
that Saffron Energy acquires both Sound Energy's and Po Valley
Energy's portfolio of Italian interests and permits.
The proposed acquisition by Saffron of Sound Energy's and Po
Valleys Italian natural gas and oil assets as contemplated in the
transaction adds significant larger assets to the Saffron portfolio
including the Selva onshore gas field (2C 17bcf), the Teodorico
offshore Adriatic gasfield (47bcf) development and the large Torre
del Morro and Santa Maria Gorretti and Dalla gas exploration
licences plus two smaller gas production fields.
The enlarged company would be re-named Coro Energy Plc ("Coro")
and, in addition to managing the enlarged Italian portfolio of
assets, is positioning itself as a mid-cap regional gas producer
and explorer. Key local executive staff from each of Sound Energy
Italy, Po Valley Operations and the Company would be retained by
Coro.
The following Board appointments are intended as part of this
transaction:
-- James Parsons, Sound Energy's Chief Executive Officer, would
be appointed as a Non-Executive Chairman
-- Sara Edmonson, Po Valley's Chief Executive and currently a
Non-Executive Director of Saffron Energy, would assume the role of
Chief Executive Officer.
-- Fiona MacAulay, Echo Energy Plc's Chief Executive Officer
would be appointed as a Non-Executive Director
The transaction is expected to be structured as a purchase of
Sound Energy's wholly owned subsidiary Sound Energy Holdings Italy
Limited ("SEHIL") and Po Valley's wholly owned subsidiary Po Valley
Operations Pty Limited ("Po Valley Operations"). The acquisition of
SEHIL ("Acquisition"), together with the grant by ASX listed Po
Valley to Saffron Energy of a call option to acquire all of the
issued share capital of Po Valley's wholly owned subsidiary Po
Valley Operations Limited (the "PVO Option"), which is expected to
be exercised immediately following completion of the acquisition of
SEHIL, will result in the combination of the Italian oil and gas
portfolios of Sound Energy, Saffron Energy and Po Valley (the
"Proposed Transaction"). Po Valley is currently interested in 53.8
per cent. of Saffron Energy's issued ordinary share capital.
Under the Heads of Terms, the consideration for the acquisition
of SEHIL and the PVO Option, which remain subject to, inter alia,
due diligence, contract and shareholder consent, in each case,
would be fully satisfied through the issue of 185,907,500 new
ordinary shares in Saffron Energy ("Ordinary Shares"). The
consideration shares pursuant to the Acquisition is intended to be
distributed directly to Sound Energy shareholders through a scheme
of arrangement.
Under the terms of the Acquisition, Sound Energy would agree to
sell 100 per cent of the issued ordinary share capital of SEHIL,
Sound Energy's wholly owned subsidiary which holds all of Sound
Energy's Italian Interests through its own wholly owned subsidiary,
Appenine Energy SpA ("APN"), but would retain its economic rights
to receive the proceeds of any future sale of Badile land owned by
APN (the "Badile Land"), which had an unaudited carrying value of
GBP1.6 million as at 30 June 2017, and the benefit of expected APN
Italian VAT receivables to the end of 2017 totalling EUR4.0 million
linked to Badile drilling costs (the "VAT"). Under the Proposed
Transaction, Saffron Energy would undertake to remit the net
proceeds of the Badile Land and the VAT to Sound Energy on receipt
by SEHIL.
Under the terms of the PVO Option, Po Valley Energy would agree
to sell 100 per cent of the issued ordinary share capital of Po
Valley Operations Limited, the company's wholly owned subsidiary
which holds 3 Italian exploration licenses including a drill ready
gas play south east of Bologna and a large offshore gas discovery.
Po Valley Energy would retain the economic rights to receive the
proceeds of the recent sale of its interests in Cadelbosco di Sopra
and Grattasasso, amounting to EUR1.13 million, which is awaiting
Ministry approval.
Under the Proposed Transaction, Saffron Energy would also issue
each of James Parsons and Sara Edmonson, warrants to subscribe for
10 million new Ordinary Shares in Saffron Energy at a price of
4.38p per Saffron Energy share, being the closing mid-price of
Saffron Energy's shares on 4 October 2017.
The Proposed Transaction is expected to require Saffron Energy
and Po Valley shareholder approval and entry by all Parties into
binding agreements to effect the Acquisition and the PVO Option.
The Proposed Transaction would amount to a related party
transaction for Saffron Energy under Rule 13 of the AIM Rules for
Companies.
Whilst the Heads of Terms are conditional and subject to
contract, Sound Energy has agreed under the Heads of Terms to pay
50 per cent. of Saffron Energy's costs relating to the Proposed
Transactionin the event that the Proposed Transaction does not
proceed for any reason.
Suspension of Ordinary Shares
By virtue of its size, the Proposed Transaction would constitute
a reverse takeover under Rule 14 of the AIM Rules for Companies.
Accordingly, the Company's Ordinary Shares will be suspended from
trading on AIM with effect from 07.30 today, pending publication of
an AIM admission document and circular to shareholders to approve
the Proposed Transaction or announcement that the Proposed
Transaction has been terminated.
Further announcements will be made, as appropriate, in due
course
Saffron Energy's CEO Michael Masterman said
"From day one, this transaction will transform Saffron into a
materially larger funded natural gas and oil company with critical
mass through an exceptional balanced portfolio of high quality
assets. Larger scale gas development assets including onshore Selva
and offshore Adriatic Teodorio and exploration assets including
Torre del Morro, Maria Goretti, and Dalla are added to the existing
gas production portfolio. This transaction pools Saffron, Po Valley
and Sound Italy's natural gas fields and gas and oil exploration
licences with a very a talented team of individuals at both Board
and management level. The proposed addition of James Parson (CEO of
Sound Energy Plc) as Chairman and Fiona MacAulay (former COO
Rockhopper) to Board will greatly enhance the Company's financial
and technical depth. The newly enlarged Saffron will be well
equipped to quickly deliver on its growth ambitions and I am
confident that they will result in significant value accretion to
our Saffron shareholders."
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
About Saffron Energy PLC
Saffron Energy is a natural gas producer with interests in
Northern Italy. Its portfolio includes two producing gas fields;
Sillaro (100%) and Bezzecca (90%) and an application for a near
development gas field called Sant'Alberto. All of Saffron Energy's
assets are located between Milan and Bologna. Saffron Energy
commenced trading on the London AIM Market under the ticker of SRON
on 24 February 2017.
For more information, please visit www.saffronenergy.co.uk or
contact the following:
Saffron Energy plc +44 (0) 7791288381
Michael Masterman, CEO info@saffronenergy.co.uk
Grant Thornton UK LLP (Financial +44 (0) 207 383
& Nominated Adviser) 5100
Colin Aaronson
Richard Tonthat
Harrison J Clarke
Turner Pope Investments (TPI)
Ltd (Broker) +44 (0)2036214120
Andy Thacker info@turnerpope.com
Cassiopeia Services (PR/IR) +44 (0) 7949690338
Stefania Barbaglio Stefania@cassiopeia-ltd.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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