The Elephant Roars: Centric Energy Acquired in Cash-and-Share Swap by Africa Oil
COMMENTARY – ProspectingJournal.com – November 29, 2010 – After following Centric Energy [CTE – TSX.V] and it’s intriguing story pertaining to its position in Kenya’s East African tertiary rift system, today the company announced that it is to be acquired by Africa Oil [AOI – TSX.V] through a $60 million equivalent cash-and-share swap agreement. And alas, it was only a matter of time.
I’d covered the Centric story in the October issue of Resource World Magazine, while here at ProspectingJournal.com, contributor Claire O’Connor was also able to give a detailed analysis on the Centric story. Given the increased stability of dealing in a somewhat exotic region such as Kenya, the story had become interesting to me after following a similar company in Turkana Energy who dealt in the same region, only to be acquired by Africa Oil as well back in 2009.
In my book, that makes Africa Oil two for two in its acquisitions within my pet project area of interest. Now whether this means that the story remains about the region itself, or whether it shifts the focus onto Africa Oil and its ability to make things happen in Kenya remains to be seen. That said, here’s how the latest acquisition’s numbers break down:
* Each Centric shareholder will receive 0.3077 of a common share of Africa Oil
* As well, each Centric shareholder can expect $0.0001 in cash for each share they hold
* That’s a premium of 71% based on the 20-day volume weighted average prices of both companies
Upon the close of the trading day, a minor upswing resulted for Africa Oil shares, but the big winner was the response in Centric’s camp, with a 41.03% increase in value to $0.55 per share upon the announcement. After the closing of the deal, in the press release sent out by Africa Oil president and CEO Keith Hill expressed the delight of his company in securing a larger piece of property in the region, further consolidating its interests in Kenya and in Ethiopia.
We will also be adding an interesting new play area in Mali which, although frontier, has many of the characteristics of the rift basins we are exploring in East Africa,” stated Hill.
“Combining the Africa Oil and Centric portfolio of oil and gas interests provides our shareholders with multiple identified prospects and leads, geographically and geologically diversified across four African countries and five under-explored petroleum systems.”
Final approval for the deal will need to be secured at the Centric Energy special meeting which is aimed to be carried out in February. However, the Directors of Centric have voted in favour of the deal, as well as other shareholders who control around 43% of the company’s shares. As well, the issues surrounding the court proceedings pertaining to properties owned by both parties will need to come to a conclusion before the official sign-off can be granted.
G. Joel Chury
Editor in Chief
DISCLOSURE: No fee has been paid for the production and distribution of this article and as such should be viewed in the context of a commentary. The author does not own any shares of the companies referred to within the article.