Canadian energy company Sterling Resources is selling its UK operating subsidiary to a Dutch exploration and production company, Oranje-Nassau Energie B.V. (ONE), for $113 million.
Sterling Resources announced on Friday that, together with its wholly‐owned subsidiary SRUK Holdings Ltd., it has entered into a definitive agreement with Oranje‐Nassau pursuant to which ONE has agreed to acquire from SRUK Holdings the entire issued share capital of Sterling Resources (UK) Ltd. (SRUK).
In the UK North Sea, the company has interests in the Cladhan, Breagh, and Niadar fields.
According to Sterling, the Dutch privately owned company will acquire SRUK for an amount equal to $163 million, less: (a) amounts necessary to redeem the outstanding $40 million principal amount of bonds issued by SRUK; (b) amounts necessary to cancel the super senior revolving credit facility entered into by SRUK, SRUK Holdings and the company with a syndicate of lenders; and (c) certain completion adjustments based on actual change of control and interim period costs relative to targeted amounts.
Following all such adjustments, and other associated expenses, the company anticipates net proceeds from the sale of SRUK of approximately $113 million, assuming a completion date of the transaction of May 15, 2017.
Following the completion of Sterling’s previously announced recapitalization on May 30, 2016, the board of directors of Sterling continued its pursuit of potential M&A opportunities.
Sterling stated it considered a number of alternatives from a variety of potential counterparties to maximize shareholder value over the nearly 9 months that followed. Ultimately, this process culminated with the board of directors of Sterling recommending the transaction with ONE, which was determined to offer Sterling’s shareholders the greatest value, the company said.
Jake Ulrich, the Chairman of the board of directors of Sterling, said: “Following a careful review of the transaction by the board of directors, in consultation with our financial and legal advisors, we believe that this transaction represents excellent value and is in the best interests of the Sterling shareholders.”
Alexander Berger, CEO of Oranje‐Nassau Energie said: “I am very pleased to announce that ONE has reached an agreement with Sterling which, as with the SEAN acquisition from Shell and Esso, will substantially grow our UK footprint and adds another high quality long term gas asset to our portfolio.
“Since ONE was acquired in 2009, production has increased fourfold and this deal makes a significant step towards reaching our longer term 150 million barrels of oil equivalent reserves target. The transaction will be funded with support from ONE’s two lender groups. ONE continues to build upon the strong relationship with its lenders, both under the $340 million RBL facility arranged in 2014 and through a €20 million increase under the €50 million NIBC Mezzanine & Equity Partners arranged second lien facility.”
Winding‐up of Sterling
In the event that the transaction is ultimately approved by shareholders of Sterling, all other conditions to closing are satisfied or waived and the transaction is completed in accordance with the terms of the share purchase agreement, Sterling will not have any active business operations or assets other than cash, including indirectly the cash consideration received by SRUK Holdings from ONE as consideration for the shares of SRUK.
As a result, it is the current intention of Sterling to undertake a voluntary winding‐up and dissolution following completion of the transaction.