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Thursday, November 12, 2015
In a move reminiscent of Mart Resources deal with Midwestern Oil & Gas that fell through, Mart and Delta Oil Nigeria have jointly agreed, pursuant to the terms of an amending agreement to amend the terms of the arrangement agreement dated October 16 in order to provide Delta with additional time to satisfy the financing condition contained in the arrangement agreement.
Mart had previously entered into an agreement with Midwestern, which was amended more than once to allow Midwestern time to meet its financial obligations of the agreement.
Delta is providing significant equity to the proposed purchase of Mart common shares pursuant to the proposed plan of arrangement but has been sourcing funding for a portion of the purchase price from traditional bank financing. However, as most of Mart’s free cash flow is currently being applied towards servicing bank debt due to the depressed oil price, Delta has advised that additional bank funding cannot be obtained until there is an increase in oil price or a change to Mart’s borrowing terms. Accordingly Delta will seek alternative sources of funds that will not require debt servicing to satisfy the Financing Condition. The consideration to be paid to Mart shareholders remains unchanged at CAD$0.35 for each Mart common share held for aggregate consideration for all of Mart’s current shares of approximately CAD$124.92 million.
Delta has agreed to provide financing to Mart while Delta sources alternative funding, and accordingly in connection with the extension to satisfy the Financing Condition, Delta or a wholly-owned subsidiary thereof has agreed to purchase, on a non-brokered private placement basis, 44,617,000 units at a price of CAD$0.18 per Unit for an aggregate consideration of CAD$8,031,060. Each unit consists of one Mart common share and one non-transferable common share purchase warrant, with each warrant entitling the holder thereof to acquire one additional common share in the capital of the company at a price of CAD$0.225 per common share, expiring February 15, 2016. The closing of the private placement is conditional only upon receipt of the requisite approval of the arrangement by the holders of common shares and options at a special meeting and the approval of the TSX and will occur forthwith following the special meeting. The proceeds of the private placement will be used for general working capital purposes.
If the financing condition is not met and the arrangement transaction does not proceed, Delta or its wholly-owned subsidiary will own approximately 11.11% of the outstanding shares of Mart, and will be entitled to increase their ownership to 19.99% of the outstanding shares of Mart if Delta exercises all of the warrants.
The amending agreement provides the parties with an outside date of February 15, 2016 to satisfy the conditions to the arrangement, including the financing condition, and close the arrangement transaction. Mart and Delta have agreed to continue to use their reasonable commercial efforts to complete the transaction by January 29, 2016.
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