Keaton Energy has made a cash offer to acquire Australia listed Xceed Resources, which owns coal exploration and development projects in South Africa.

The offer is for A$0.14 per share. Pursuant to a scheme implementation deed dated 23 August 2013 between Keaton and Xceed, the Offer will be implemented by way of a scheme of arrangement (the Scheme) in accordance with Part 5.1 of the Australian Corporations Act of 2001, as amended (the Act) between Xceed and its shareholders.

Following implementation of the Scheme, Xceed will become a wholly owned subsidiary of Keaton and will be delisted from the official list of the Australian Securities Exchange (ASX).

Due to Xceed not being a company that is registered in the Republic of South Africa (South Africa) and instead having its place of central management and control in Australia, Xceed is not subject to the provisions of the South African Companies Act of 2008 and the Takeover Regulations. Xceed is, however, subject to the provisions of the Act, the regulation of the Australian Securities and Investments Commission (ASIC) and the Australian Takeovers Panel.

The Scheme forms part of Keaton’s strategy to grow into a + 5 Mtpa producer of diversified coal products. Xceed has an interest in three coal projects.

The coal projects fit naturally within the existing Keaton portfolio of operating mines and development projects.

Moabsvelden, an open pit thermal coal project (Xceed’s key asset) being located in close proximity to Keaton’s Vanggatfontein Colliery in Mpumalanga, South Africa, will create significant operational synergies and Keaton will use its experience in opencast mining and coal processing to develop and operate this asset. At the end of May 2013 Xceed received notification from the Department: Mineral Resources (the DMR) of the issue of a Mining Right for Moabsvelden and has signed a project finance term sheet with Standard Bank to develop the colliery. A positive for Moabsvelden is that it will be entirely open castable, with a low stripping ratio and a mine life in excess of 15 years.

Pursuant to the Scheme, Keaton will acquire the entire issued share capital of Xceed (being 140,500,435 fully paid ordinary shares) via a cash offer of A$0.14 per share held by the Xceed shareholders as at the record date, with the maximum purchase consideration therefore equating to A$19,670,060.90.

The Offer Consideration represents a premium of:

–    27% to the last close of Xceed’s ordinary shares on the ASX (as at 23 August 2013);

–    35% to the 30-day volume weighted average price (VWAP) of Xceed’s ordinary shares on the ASX (over the 30 trading days prior to today’s announcement); and

–    66% to the 30-day VWAP to 19 June 2013, being the last trading day prior to the announcement by Xceed that it was in discussions about a potential corporate transaction.

Keaton has entered into an agreement with Gunvor Group Ltd (Gunvor), which holds a 23.9% stake in Keaton through its wholly owned subsidiary Plusbay Limited (Plusbay), in terms of which Gunvor will fund a maximum of US$18 million, and a minimum of US$10 million, of the Purchase Consideration via a combination of factors.

Xceed and Keaton have agreed to cooperate with each other to implement the Scheme and Xceed has given certain undertakings regarding the conduct of the Xceed business, on the terms set out in the Scheme Implementation Deed.

Xceed intends to send a scheme booklet to shareholders in late October 2013 containing full details of the Scheme. The scheme booklet will include, among other things, the reason for the Board’s unanimous recommendation and a copy of the Independent Expert’s Report.


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