Crown Energy AB (publ) (the “Company” or ”Crown Energy”) has entered into an agreement to acquire all shares of ESI Group SA (“ESI Group”), which in turn is the owner of a portfolio of real estate assets in Angola, valued at SEK 910 million (the “Transaction”). Payment of the Transaction is proposed to be carried out through issuance of 364 million C-shares, which are assigned at a value of 2.50 SEK per new share.
ESI Group – Property development and services
ESI Group’s business model is to develop and offer customized solutions relating to (staff) residential and offices to companies primarily in the oil and gas industry. Their services offer everything from planning and construction to management and other value-added services, such as security, transportation, telecommunications, catering and recreational facilities. Customers include some of the world’s leading oil and gas companies with high credit ratings and most contracts are in USD.
The business has worked for around 15 years and was founded by the current owner Yoav Ben-Eli.
The business has rental and service revenues of approximately SEK 150 million and an EBITDA of about SEK 100 million based on current actual outcome and forecast for financial year 2016. Crown Energy is entitled to the full benefit of these revenues from the assets as of 1 January 2017.
Two business units
After the Transaction, Crown Energy will consist of two business units – Energy and Property Development & Services. The Transaction makes Crown Energy a major player in the oil and gas industry and creates significant growth potential for both business units through expansion in current and new markets.
“I consider the deal to be very good for all shareholders and it is indeed a big step forward for Crown Energy. For a long time I have communicated that Crown Energy is looking at different businesses with cash flow generating operations and this has resulted in the acquisition of the ESI Group. We take onboard a well-managed company that is profitable and has great growth potential. The strong cash flow also increases our ability to develop existing operations in Crown Energy, since the end market for our exploration activities and the property services business largely consists of the same companies and customers, i.e. the oil and gas industry. As a larger single company, we see new opportunities to realize future business potential in both business areas”, says Andreas Forssell, CEO of Crown Energy.
Currently, the acquired business is conducted through the Angolan company ESI Engineering Services International Angola Ltd (“ESI Angola“). The real estate assets will be transferred to a newly formed Angolan company, YBE Imobiliaria Lda (“YBE Imobiliaria“). All senior executives will remain in the acquired business. Other employees in ESI Angola will remain in that company and a service agreement regarding services will be established between YBE Imobiliaria and ESI Angola.
The parent company of YBE Imobiliaria is the Luxembourg-based company ESI Group and Crown Energy will acquire these companies. YBE Ventures Ltd (“YBE Ventures”), a Malta-registered private company, is the owner of ESI Group. YBE Ventures is in turn owned by the founder Yoav Ben-Eli. He is one of the key persons who remains with the business and will after the Transaction, indirectly, be the largest shareholder and a board member of Crown Energy.
The business comes with a liability to a local Angolan bank of SEK 36 million which is secured against a recently completed property.
“Becoming part of Crown Energy, which is a listed company, gives us greater access to the international capital markets, which is important in order for the business to grow even faster and for further expansion. I also see great benefits for Crown Energy’s existing business as it now has access to our network of major players in the oil and gas market”, says Yoav Ben-Eli, founder and owner of ESI Group.
Share issue and the Under Quota Issue
The Transaction is proposed to be carried out as a directed share issue, introducing a new share class, of maximum of 364 million C-shares (“C-shares”). The current owner of ESI Group, YBE Ventures, will have the right to subscribe for the C-shares in the Company, at a subscription price below the quota value of the shares corresponding to a total value of SEK 1.00 for all shares subscribed to. An amount corresponding to the difference between the subscription price and the quota value for the Company’s shares will be transferred from the unrestricted equity (the “Under Quota Issue”).
Both the Transaction and the share issue is conditional on a decision by the extra general meeting, which is expected to be held on 12 December 2016.
C-shares and conversion into ordinary shares
In connection with the Under Quota Issue it will be proposed to the shareholders of the Company to resolve to introduce a new share class (C-shares) whereby the current issued shares of the Company will become ordinary shares. In addition, a conversion and redemption clause is also introduced in the Company’s articles of association comprising the C-shares. The conversion clause will be used in case the Transaction is completed and the redemption clause will be used in case the Transaction is not completed.
The conversion clause, redemption clause and redemption price will be based on a pre-agreed value of the respective parties. Crown Energy’s value is based on SEK 2.50 per share, which is calculated based on the average share price during the past 30 days, and this is a premium of 0.1 SEK per share. The value of the acquired business, when fully transferred, are valued to SEK 910 million.
Depending on the final exchange ratio agreed between the parties and to what extent Cement Fund SCSp (”Cement Fund”) exercises its warrants to subscribe for shares in Crown Energy, YBE Ventures will own approximately 75-80 per cent of the share capital and votes in Crown Energy at maximum outcome of the above mentioned exchange ratio and following completed conversion of C shares. A majority of the shareholders of Crown Energy stand behind the Transaction.
“This deal makes Crown Energy into a much larger and more influential player within the oil and gas industry. Through the deal we may develop the current business in Crown Energy and the acquired business may grow faster after it will become part of a listed company. Shareholder value is generated hereby”, says Pierre-Emmanuel Weil the chairman of the board in Crown Energy and representative for the current largest shareholder Cement Fund.
- Through the Transaction, YBE Ventures will become the new principal shareholder of Crown Energy.
- After the Transaction, Crown Energy will consist of two business units – Energy and Property Development & Services.
- Crown Energy is entitled to the revenue from the assets as of 1 January 2017.
- After completed conversion of C-shares to ordinary shares, YBE Ventures will own approximately 75-80 per cent of the share capital and votes in Crown Energy.
- The Transaction and the share issue is conditional upon a decision by an extra general meeting, which is preliminarily planned to be held on 12 December 2016.
- It is proposed that the shareholders of the Company resolve on introducing a new share class and a subsequent directed share issue of a maximum of 364 million new C-shares, where ESI Group’s current owner, YBE Ventures is entitled to subscribe for the new shares in the Company.
- The subscription price in the share issue will be below the quota value, where YBE Venture is entitled to subscribe for all new shares for an amount corresponding to SEK 1.00.
- In connection with the issuance of the C-shares, an amount of approximately SEK 10.7 million, corresponding to the difference between the subscription price and the quota value for the Company’s shares, will be transferred from the Company’s unrestricted equity to the share capital.
- In connection with the share issue of C-shares, the current shares of the Company will become ordinary shares. In addition, a conversion and redemption clause is also introduced in the Company’s articles of association, whereby the conversion clause will be used in case the Transaction is completed by conversion of C-shares and the redemption clause will be used in case the Transaction is not completed by redemption of C-shares.
- The conversion and redemption ratio will be based on a pre-agreed value of the respective parties.
- Crown Energy’s value for the Transaction is based on a price of SEK 2.50 per share, and the total value of the Transaction is SEK 910 million.
- The Transaction is expected to be fully complete during the first half of 2016.
- YBE Ventures has been granted an exemption from carrying out a mandatory bid that otherwise would have arisen in connection with the conversion of C-shares, see decision 2016:34 from the Swedish Securities Council.
Indicative time table
- Notice of an extra general meeting will be published later today (10 November 2016).
- The extra general meeting is planned to be held on 12 December 2016.
- Investor presentations will be carried out both prior to the general meeting and during the first quarter of 2017.
- A prospectus, for admission to trading of the new ordinary shares at NGM Equity, will be published during the second quarter of 2017.
- The Transaction is expected to be fully complete during the first half of 2016.
Crown Energy has also prepared a presentation which summarises the transaction and the acquired business. This presentation is available on the Company’s website.
This information is information that Crown Energy AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 8:00 AM CET on 10 November 2016.
Please contact Andreas Forssell, CEO, Crown Energy AB
+46 8 400 207 20
+46 760 15 15 95
ABOUT CROWN ENERGY
Crown Energy is an international oil and gas company engaged in exploration in Africa and Middle East. Growth is created by developing assets in early stages and then maximising value by introducing appropriate industry partners in the development and production stages. For more information please visit www.crownenergy.se.