Alliance Oil Co., an oil producer with assets in Russia, recommended its stakeholders accept a 7.8 billion-krona ($1.22 billion) takeover offer from current shareholders Lambros Overseas SA and OJSC Alliance Group.
Lambros and OJSC Alliance, known as Alliance Group, offered 60 kronor in cash for each of the ordinary shares of Alliance Oil, or AOC, they said in a joint statement today. The stock, which the Stockholm exchange this morning halted from trading pending the statement, closed at 57.65 kronor yesterday.
“The offer provides all AOC’s independent shareholders with an opportunity to realize cash value of their investment at a fair price that reflects the future prospects for the company,” AOC Chairman Eric Forss said in the statement.
The companies also bid 313 kronor for each of AOC’s preference shares, plus an additional price based on a formula related to dividend payments dates, they said.
Alliance Group, which already owns 45 percent of AOC’s ordinary shares and 7 percent of the preference shares, plans to delist the company from the Stockholm stock exchange once the purchase has been completed, it said. In the current market environment, public equity markets don’t represent the optimal ownership structure for the oil producer, Alliance Group said.
“As a private company, it will be easier to take a strategic approach to operational challenges and opportunities facing AOC today,” Alliance Group said. “Earnings will be improved through the increased leverage afforded by the high liquidity and low interest rates the debt markets offer, which will be more easily accessed under private ownership.”
AOC is a Moscow-based company with Swedish depository receipts listed in Stockholm. It has proven and probable oil reserves of about 733 million barrels of oil equivalent, according to its website.
AOC’s “corporate structure, administration and corporate governance will be simplified, enabling more efficient operations and cost reductions,” the buyers said. Still, Alliance Group would seek to be a strategic investor and would aim to develop AOC as an independent oil company, it said. The group “is not in discussion with any third parties about the on-sale of AOC or all or significant parts of AOC’s business,” it said.
The offer represents a premium of 17 percent on the over the volume-weighted average closing price of the ordinary shares in the past three months and a 6 percent premium for the preference shares, Alliance Group said. Repsol Exploration SA, which holds 3 percent of the votes in Alliance Oil, is in favor of approving the transaction.