MPI A French société anonyme with a share capital of €11,533,653.40 Registered office: 51, rue d'Anjou - 75008 Paris
517 518 247 R.C.S. Paris
(the 'Company')
This document is a free English translation of the draft agreement on the merger of the Company into M&P. This translation has been prepared solely for the information and convenience of the shareholders of the Company and M&P and other readers. No assurances are given as to the accuracy or completeness of this translation and the Company and M&P assumes no responsibility with respect to this translation or any misstatement or omission that may be contained therein. In the event of any ambiguity or discrepancy between this translation and the original French version of the draft merger agreement, the French version shall prevail.
This document does not constitute and shall not be construed as an offer or the solicitation of an offer to purchase, sell or exchange any securities of M&P or the Company. In particular, it does not constitute an offer or the solicitation of an offer to purchase, sell or exchange of securities in any jurisdiction (including the US, the United Kingdom, Australia, Canada and Japan) in which it would be unlawful or subject to registration or qualification under the laws of such jurisdiction.
This business combination is made for the securities of a foreign company, and is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in any of the documents made available to the public in the context of the business combination have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the US federal securities laws, since the issuer is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment.
In connection with the proposed transaction, the required information documents will be filed with the Autorité des Marchés Financiers ('AMF'). Investors and shareholders are strongly advised to read, when available, the information documents that have been filed with the AMF because they will contain important information.
Shareholders and investors may obtain free copies of documents filed with the AMF at the AMF's website at www.amf-france.org or directly from M&P's website (www.maureletprom.fr) or the Company's website (www.mpienergy.fr).
Dear All,
The purpose of this report, which was drawn up pursuant to articles L. 236-9 (4) and R. 236-5 of the French Commercial Code (the 'Report'), is to describe the conditions, especially the legal and financial conditions, of the proposal for a merger of the Company into Etablissements Maurel & Prom, a French société anonyme with a share capital of €93,604,436.31, having its registered office at 51 rue d'Anjou - 75008 Paris, registered with the commercial and companies registry of Paris under number 457 202 331 ('M&P') (the 'Merger') to be presented at the ordinary and extraordinary general meeting of the shareholders of the Company on 17 December 2015.
The Report should be read alongside the document pertaining to the Merger that will be registered by the French markets authority, the Autorité des marchés financiers, (the 'Document E') and is to be made available to the shareholders on the Company's website (www.mpienergy.com) and on that of the Autorité des marchés financiers (www.amf-france.org).
This Report, which was drawn up by the board of directors of the Company, is divided into two sections: the first section is a presentation of the proposed Merger and the second concerns the resolutions to be submitted to the shareholders of the Company at the ordinary and extraordinary general meeting.
The Company and M&P have commenced talks on the possibility of a merger between them that would result in the creation of front-running junior gas and oil company. The Merger between the Company and M&P is part and parcel of the consolidation trend affecting independent oil and gas exploration and production companies across the board. It would give the combined entity greater financial capacity through:
a combination of significant cash flows from production in Gabon and Tanzania and dividends from Seplat in Nigeria;
a better access to financial markets; and
substantial cost synergies and tax savings which, for example, would have represented
€14.5 million for the 2014 financial year on a pro forma basis, of which €12 million in tax savings and €2.5 million in operating expenses corresponding to listing, structural and management costs of the Company.
The Merger would also enable the new entity to benefit from an attractive combination of developed onshore assets, offering a favourable oil (variable price) / gas (fixed price) product mix and greater geographic diversification combining (i) operated assets generating substantial oil production with long-term visibility (including through the Ezanga permit in Gabon held at 80%),
(ii) operated assets that began producing gas on 20 August 2015 offering exposure to East African countries (Tanzania), (iii) a significant stake (21.76%) in Seplat, one of the leading indigenous operators in Nigeria with strong potential for growth, (iv) significant upside development and appraisal potential in Canada and (v) exploration regions in Colombia, Myanmar and Namibia.
The group created by the Merger would offer investors an attractive investment vehicle in terms of liquidity and market capitalisation with an optimised balance sheet and sustainable funding, ranking it among the top-tier independent European oil exploration and production companies.
Merging the two businesses would give the new entity more weight in terms of potential combinations with selected other companies as part of the consolidation trend affecting independent oil and gas exploration and production companies. Work is already underway to identify the best candidates with which the entity could build a bigger and more diversified group.
After announcing the Merger plans on 27 August 2015, the two companies undertook an analysis of the economic, financial, legal and operational conditions under which the Merger might take
place and, following the recommendations of the ad hoc committees they respectively appointed to consider the plans, the boards of directors of the Company and of M&P met on 15 October 2015 and decided to approve the Merger and the draft agreement setting out the terms and conditions for the transaction (the 'Merger Agreement'). The Company and M&P signed the Merger Agreement and published it under the conditions defined in the applicable regulatory provisions. The Merger Agreement is appended hereto in Appendix 1.
Independent Auditor
Upon recommendation of its ad hoc committee, the Company board of directors decided to make a voluntary appointment of the firm Associés en Finance, represented by Mr Arnaud Jacquillat, as independent auditor entrusted with evaluating the fairness of the financial terms offered to Company shareholders in the proposed Merger. It is understood that this independent auditor must comply with the applicable rules for independent auditors appointed pursuant to the AMF General Regulations. The auditor's work was overseen by the ad hoc committee set up by the Company board of directors.
The independent auditor's report dated 15 October 2015 is available on the Company's website and will be appended to Document E.
After describing its work, the independent auditor issued the following opinion on the financial terms offered to Company shareholders in the Merger.
'The originally planned ratio of 2 MPI shares (post €0.45 dividend) for one Maurel & Prom share was revised to 1.75 MPI shares for one Maurel & Prom share after the latest market data were taken into account, along with specific events affecting Maurel & Prom. The ratio is within the range of the implied ratios described [in the report] (1.5 middle value using DCF method, 2.3 based on the last stock prices quoted before the merger announcement), and is within the range identified from the estimated future cash flow method. Our valuation work and all the above considerations lead us to conclude that the proposed merger exchange ratio of 1.75 MPI shares for one Maurel & Prom share is fair.'
Merger Auditors
Mr Olivier Péronnet and Mr Jacques Potdevin were appointed as Merger Auditors in an order issued by the presiding judge of the Paris Commercial Court on 1 September 2015. Their assignment is to examine the terms of the Merger and specifically (i) to verify that the relative values attributed to Company and M&P shares are appropriate and the exchange ratio is equitable,
(ii) to assess the value of the contributions in kind to be made as part of the merger between the Company and M&P and (iii) to draw up - and bear liability for - a report on the value of the transferred assets as provided for in article L. 236-10-III of the French Commercial Code and a report on the terms of the Merger as provided for in article L. 236-10-I of the French Commercial Code.
The reports drawn up by the Merger Auditors can be consulted on the Company's website and are also to be appended to the Document E.
In their reports, after describing their work, the Merger Auditors set out their conclusions concerning the value of the assets and determination of the exchange ratio.
'On the basis of our work and as at the date of this report, we are of the view that the value of the contributions of €353,749,589 is not overestimated and, therefore, the net assets contributed are at least equal to the amount of the share issue of the company receiving the contributions increased by the merger premium'.
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