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Sound Energy PLC (SOU)

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Tuesday 18 January, 2022

Sound Energy PLC

Possible Offer for Angus Energy Plc

RNS Number : 7416Y
Sound Energy PLC
18 January 2022
 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

 

THIS IS AN ANNOUNCEMENT FALLING UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE. THERE CAN BE NO CERTAINTY THAT AN OFFER WILL BE MADE, EVEN IF THE PRE-CONDITIONS SET OUT BELOW ARE SATISFIED OR WAIVED.

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

 

18 January 2022

 

Sound Energy plc

("Sound Energy" or the "Company")

 

Possible Offer for Angus Energy Plc

 

The board of directors of Sound Energy (AIM: SOU), the energy transition company, notes the recent announcement by Angus Energy Plc ("Angus") of the commencement of a strategic review and formal sale process pursuant to the relevant requirements of the Code and announces that it is evaluating a possible all-share offer for the entire issued and to be issued share capital of Angus (the "Possible Offer" to form the "Combined Group"). Sound Energy confirms that it has previously made indicative proposals to Angus regarding a potential all-share combination (the "PotentialCombination"). The board of directors of Angus (the "Angus Board") unequivocally rejected the indicative proposals.

 

Indicative proposals

 

Sound Energy has submitted three non-binding indicative proposals of 1.00 pence per Angus share, 1.30 pence per Angus share and 1.40 pence per Angus share to Angus's Chairman and Managing Director on 18 December 2021, 30 December 2021 and 5 January 2022 respectively, such possible consideration to be satisfied by the issuance of Sound Energy shares to Angus shareholders. These proposals represent premiums of approximately 54%, 100% and 115% respectively to the closing share price of 0.65 pence per Angus share on 17 December 2021, being the last business day immediately prior to Sound Energy's initial proposal. Each of these proposals was unequivocally rejected by the Angus Board. On 14 January 2022, Gneiss Energy Limited, in its capacity as financial adviser to Sound Energy, made a further formal approach orally to the Managing Director of Angus and Beaumont Cornish Limited, financial adviser to Angus, confirming the terms of the Possible Offer (which are described below) and noted Sound Energy's desire to proceed with the Possible Offer on the basis of a recommendation from the Angus Board.

 

Transaction rationale

 

The Company has evaluated this Potential Combination for some time and believes that the Potential Combination would be a strategically compelling proposition.

 

Sound Energy believes the Potential Combination would represent the combination of two complementary businesses, with attractive onshore gas developments in high gas price jurisdictions.

 

The board of directors of Sound Energy (the "Sound Energy Board") consider that the Potential Combination would create a more effective operating entity and an enlarged business with substantial capabilities that would be greater than the sum of the two parts.

 

The Potential Combination would allow both the Company's and Angus's shareholders to participate in any future value generated by the Combined Group and its more diversified portfolio.

 

Specifically, the Sound Energy Directors believe that a combination with Angus would provide the Combined Group with the following key benefits:

1.  An enlarged platform for investment and growth;

2.  A larger portfolio with diversification across sectors and maturity of assets;

3.  The potential to deliver multiple projects for the Combined Group's shareholders; and

4.  An experienced team with complementary industry backgrounds.

 

The strategy of Sound Energy has been to actively further the energy transition. The focus of the Sound Energy Board has been on the development of gas assets in jurisdictions where high gas pricing, attractive fiscal terms and a beneficial regulatory environment are supportive to project development.

 

The Possible Offer

 

The terms of the Possible Offer would comprise the issue of 0.680 Sound Energy ordinary shares for each Angus ordinary share (the "Exchange Ratio") (subject to the reservations set out below). By way of example, the Exchange Ratio represents a value of approximately 1.50 pence per Angus share based on a closing price of 2.20 pence per Sound Energy share on 17 January 2022, being the last business day immediately prior to the date of this announcement.

 

At the value of 1.50 pence per Angus share implied by the Exchange Ratio, the Possible Offer, if made, would represent a premium of approximately:

· 93 per cent. to the Angus closing price of 0.775 pence per share on 5 January 2022, being the last business day immediately prior to the announcement by Angus of the commencement of a strategic review and formal sale process;

· 111 per cent. to the volume weighted average price for Angus shares over the two-month period ended on and including 5 January 2022, being 0.709 pence per share; and

· 32 per cent. to the Angus closing price of 1.13 pence per share on 17 January 2022, being the last business day immediately prior to the date of this announcement.

 

The Exchange Ratio would give an implied value for the entire existing issued and to be issued share capital of Angus of approximately £21.6 million (based on a closing price of 2.20 pence per Sound Energy share on 17 January 2022, being the last business day immediately prior to the date of this announcement).

 

Under the terms of the Possible Offer, it is expected that Angus shareholders would own approximately 38 per cent. of the Combined Group, and Sound Energy shareholders would own approximately 62 per cent. of the Combined Group.

 

Given the Possible Offer is proposed to be structured as an all-share offer, Sound Energy is currently only minded to proceed with the Possible Offer on the pre-condition that a recommendation from the Angus Board is ultimately forthcoming. This pre-condition can be waived by Sound Energy, and further pre-conditions are set out below.

 

Sound Energy has received support for the Possible Offer from Angus shareholders in respect of a total of 152,203,626 Angus shares, representing, in aggregate, 13.92 per cent. of Angus's issued share capital as at 17 January 2022 (being the last business day immediately prior to the date of this announcement). Further details of the irrevocable undertaking and letters of intent are set out in Schedule 1.

 

The Sound Energy Directors look forward to constructive engagement with Angus regarding the Possible Offer.

 

At this stage, there can be no certainty that an offer will be made.

 

An announcement of a firm intention to make an offer by Sound Energy under Rule 2.7 of the Code remains subject to the satisfaction or waiver of a number of pre-conditions, namely satisfactory completion of customary due diligence by Sound Energy, a recommendation from the Angus Board as well as final approval by the Sound Energy Board. Sound Energy reserves the right in its absolute discretion to waive any or all of these pre-conditions, in whole or in part.

 

Pursuant to Rule 2.5 of the Code, the Company reserves the right to introduce other forms of consideration and/or vary the mix or composition of consideration of any offer. The Company also reserves the right to make any offer on less favourable terms than those set out in this announcement:

i.  with the agreement of the Angus Board;

ii.  if a firm offer or possible offer for Angus is announced by a third party; or

iii.  following the announcement by Angus of a whitewash transaction pursuant to the Code.

 

In the event Angus announces, declares, pays or makes any dividend or distribution to Angus shareholders after the date of this announcement, Sound Energy reserves the right to make an equivalent reduction in the terms of the Possible Offer.

 

Further announcements will be made as appropriate.

 

Under Rule 2.6(a) of the Code, Sound Energy must, by 5:00pm on 15 February 2022, either announce a firm intention to make an offer for Angus in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for Angus, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline will only be extended with the consent of the Panel on Takeovers and Mergers (the "Panel") in accordance with Rule 2.6(c) of the Code.

 

This is an announcement falling under Rule 2.4 of the Code and does not constitute an announcement of a firm intention to make an offer under Rule 2.7 of the Code.

 

The person responsible for arranging release of this announcement on behalf of the Company is Graham Lyon.

 

Rule 2.9

 

In accordance with Rule 2.9 of the Code, the Company confirms that as at close of business on 17 January 2022, the issued share capital of the Company comprises 1,629,183,907 ordinary shares of 1 pence each, with ISIN: GB00B90XFF12. The Company does not hold any shares in treasury.

 

For further information, please contact:

 

Sound Energy plc

Graham Lyon, Executive Chairman

[email protected]

Gneiss Energy Limited - Financial Adviser

Jon Fitzpatrick / Paul Weidman

Tel: +44 (0) 20 3983 9263

Cenkos Securities Plc - Nominated Adviser

Ben Jeynes / Peter Lynch

Tel: +44 (0) 20 7397 8900

www.soundenergyplc.com

 

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by

virtue of the European Union (Withdrawal) Act 2018.

 

Disclosure requirements of the Takeover Code (the "Code")

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

 

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

 

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

 

Publication on website

 

In accordance with Rule 26.1 of the Code, a copy of this announcement will be made available, subject to certain restrictions relating to persons resident in restricted jurisdictions, on the Company's website www.soundenergyplc.com by no later than noon (London time) on the business day following the announcement.

 

For the avoidance of doubt, the content of the website referred to above is not incorporated into and does not form part of this announcement.

 

Other notices

 

Gneiss Energy Limited is an appointed representative of Talbot Capital Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Sound Energy plc and no-one else in connection with the possible transaction described in this announcement and accordingly will not be responsible to anyone other than Sound Energy plc for providing the protections afforded to clients of Gneiss Energy Limited nor for providing advice in relation to the matters described in this announcement.

 

Forward-looking statements

 

This announcement may contain certain "forward-looking statements". The forward-looking statements contained in this announcement may include statements relating to Sound Energy's proposals to the Angus Board, and other statements other than historical facts. Forward-looking statements often use words such as "believe", "expect", "estimate", "intend", "anticipate" and words of a similar meaning. You should not place undue reliance on these forward-looking statements, which reflect the current views of Sound Energy, are subject to risks and uncertainties about Angus and are dependent on many factors, some of which are outside of the control of Sound Energy. There are important factors, risks and uncertainties that could cause actual outcomes and results to be materially different. Except as required by law, Sound Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 



 

Schedule 1

 

In accordance with Rule 2.10 of the Code, the Company announces that G.P. (Jersey) Limited has entered into a hard irrevocable undertaking in favour of the Company in respect of a total of 94,496,666 Angus shares, representing a shareholding of approximately 8.64 per cent. in Angus (excluding treasury shares) on 17 January 2022 (being the last business day immediately prior to the date of this announcement) to vote in favour of or accept any offer which is made by the Company pursuant to the terms of the Possible Offer, including at the Exchange Ratio, subject to Sound Energy's rights that are reserved in this announcement (the "Irrevocable Undertaking"). Further details regarding the Irrevocable Undertaking are set out below.

In addition, the Company has received non-binding letters of intent from each of Sebastian Marr, Niall Roberts, Clive Roberts, Martin Lang and Jacqueline Lang in favour of the Company supporting the Possible Offer, including at the Exchange Ratio, subject to Sound Energy's rights that are reserved in this announcement, in respect of a total of 57,706,960 Angus shares, representing approximately 5.28 per cent. of the share capital of Angus in issue (excluding treasury shares) on 17 January 2022 (being the last business day immediately prior to the date of this announcement). 

The Irrevocable Undertaking and the letters of intent in favour of the Company represent total shareholdings of approximately 13.92 per cent. in support of the Possible Offer.

The Irrevocable Undertaking remains binding in the event of a higher, or any other, bid or offer for Angus.

The Irrevocable Undertaking will cease to be binding if, among other things:

· This announcement is not released by 5:00 p.m. on 18 January 2022;

· Sound Energy announces, with the consent of the Panel, that it does not intend to proceed with the Possible Offer;

· the Company announces, with the consent of the Panel, and before the publication of any document containing details of any takeover offer within the meaning of section 974 of the Companies Act 2006 or the publication of any document to be sent to Angus's shareholders containing amongst other things, details of any proposed scheme of arrangement under Part 26 of the Companies Act 2006 between Angus and Angus's shareholders in connection with any offer by the Company, that it does not intend to proceed with the Possible Offer and no new, revised or replacement scheme of arrangement or takeover offer is announced by the Company in accordance with Rule 2.7 of the Code; and

· the takeover offer (or scheme of arrangement as applicable) does not become effective, is withdrawn or lapses in accordance with its terms.

In addition to the Irrevocable Undertaking referred to above, Sound Energy has received non-binding letters of intent to vote in favour of a scheme of arrangement or accept any takeover offer (as necessary) and vote in favour of any resolutions which would assist with the implementation of the Potential Combination from each of the following Angus shareholders:

· Sebastian Marr, in respect of 11,000,000 Angus ordinary shares, representing approximately 1.01% per cent. of the ordinary share capital of Angus in issue on the last business day immediately prior to the date of this announcement;

· Niall Roberts, in respect of   10,489,989   Angus ordinary shares, representing approximately 0.96% per cent. of the ordinary share capital of Angus in issue on the last business day immediately prior to the date of this announcement;

· Clive Roberts, in respect of 4,000,000 Angus ordinary shares, representing approximately 0.37% per cent. of the ordinary share capital of Angus in issue on the last business day immediately prior to the date of this announcement;

· Martin Lang, in respect of 20,671,382 Angus ordinary shares, representing approximately 1.89% per cent. of the ordinary share capital of Angus in issue on the last business day immediately prior to the date of this announcement; and

· Jacqueline Lang, in respect of 11,545,589 Angus ordinary shares, representing approximately 1.06% per cent. of the ordinary share capital of Angus in issue on the last business day immediately prior to the date of this announcement.

The letters of intent in favour of the Company to support the Possible Offer from each of Sebastian Marr, Niall Roberts, Clive Roberts, Martin Lang and Jacqueline Lang in respect of a total of 57,706,960 Angus shares therefore represent approximately 5.28 per cent. of Angus's issued ordinary share capital (excluding treasury shares) on 17 January 2022 (being the last business day immediately prior to the date of this announcement).

 

 

 



 

Sources of financial information and bases of calculation

 

In this announcement, unless otherwise stated or the context otherwise requires, the following bases and sources have been used:

1.  The value attributed to the Possible Offer is based on:

1.1.  The value of 2.20 pence per Sound Energy share, being the closing price on Thomson Reuters Eikon on 17 January 2022, being the last trading day prior to this announcement;

1.2.  The Exchange Ratio of 0.680;

1.3.  Currently issued Angus shares outstanding of 1,093,086,880;

1.4.  Potential further issued Angus shares outstanding of 214,055,555 pursuant to disclosed Angus options and warrants with an exercise price of 1.50 pence or less per Angus share;

1.5.  Potential further issued Angus shares outstanding of 140,000,000 under the Knowe Properties Limited convertible note;

1.6.  Resulting in total potential issued Angus shares outstanding of 1,447,142,435.

2.  The proportionate ownership of the Combined Group between Sound Energy and Angus is based on:

2.1.  For Sound Energy shareholders, currently issued Sound Energy shares outstanding of 1,629,183,907;

2.2.  For Angus shareholders, the total potential issued Angus shares outstanding of 1,447,142,435 as set out in 1.6 above; and

2.3.  The Exchange Ratio of 0.680.

3.  Unless otherwise stated all prices for Sound Energy shares are closing prices derived from Thomson Reuters Eikon.

4.  Unless otherwise stated all prices for Angus shares are closing prices derived from Thomson Reuters Eikon.

5.  Volume weighted average prices are derived from Thomson Reuters Eikon for the time periods stipulated.

6.  Certain figures included in this announcement have been subject to rounding adjustments.

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