NIPCO Plc has proposed a new deal to raise its stake in Savannah Energy Plc to about 26.5 per cent.
The deal intends to terminate the off-market share buyback agreement announced earlier on October 22 this year and approved by shareholders on November 28.
Savannah Energy announced on Tuesday, December 30, its plans to enter into a relationship agreement with NIPCO.
It said, following termination of the buyback agreement, NIPCO proposed to acquire 118,083,927 of the 143,565,582 ordinary shares that were subject to the buyback agreement, which would increase its stake to approximately 25 per cent of the company’s current issued share capital.
In addition, NIPCO has also indicated interest in acquiring up to a further 1.5 per cent of the company’s current issued share capital through additional secondary market transactions with identified existing shareholders.
“If completed in full, these additional acquisitions would increase NIPCO’s ownership interest in Savannah to approximately 26.5% of the Company’s current issued share capital.
“There can be no certainty such further acquisitions will occur, and to the extent that they do occur, the Company would expect to update its website to reflect the increased ownership holding,” Savannah Energy stated.
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According to the British independent energy company, the relationship agreement is expected to provide a number of important protections for the company and its minority shareholders and to ensure that the company is at all times able to carry on its business independently of NIPCO.
Termination of the buyback agreement
According to Savannah Energy, in reaching its decision to terminate the buyback agreement, its board, having taken appropriate external professional advice, concluded that the proposed entry into the relationship agreement would be of significant strategic value to the company and its minority shareholders.
It noted in particular that the board considered the relationship agreement would deliver meaningful minority shareholder protections and provide important assurances regarding the company’s continued operational and decision-making independence from its largest shareholder.
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It also sees the proposed termination of the buyback agreement would preserve approximately £10.05 million of the company’s cash resources (due to the company not having to buy back the ordinary shares subject to the buyback agreement), enhancing financial flexibility while retaining the company’s ability to return capital to shareholders through board-approved on-market share buybacks under the authority granted by shareholders at the general meeting held on November 28, this year.
What the agreement entails
The relationship agreement is expected to include undertakings by NIPCO to exercise its voting rights in support of board-recommended governance-related shareholder resolutions and confirmation that NIPCO has no right to board representation.
It involves an undertaking from NIPCO not to pursue any hostile takeover of the company (subject to certain exceptions) as well as orderly market disposal obligations governing any future disposals of shares by NIPCO, covering both on-market and off-market trades, with the company being afforded a certain period of time in the latter instance to attempt to identify an alternative purchaser (should it so choose).
“The Relationship Agreement is expected to remain in force for so long as NIPCO and its affiliates hold, in aggregate, 12.5% or more of the Company’s issued share capital.
“Entry into the Relationship Agreement is expected to occur shortly following regulatory consultation, and NIPCO is expected to undertake to the Company imminently to agree to any amendments to the draft Relationship Agreement that may follow the regulatory consultation,” Savannah Energy highlighted.
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It hinted that its Chief Executive Officer, Andrew Knott, has proposed to acquire the balance of 25,481,655 ordinary shares that were subject to the buyback agreement, not being acquired by NIPCO.
This will increase Knott’s total interest to 292,764,370 ordinary shares, equal to approximately a 13.8 per cent stake in the company’s current issued share capital.
“The Company’s independent directors, being all of the directors other than Andrew Knott, consider, having consulted with Strand Hanson Limited, the Company’s nominated adviser, that the terms of these arrangements and the actions to be taken by the Company in connection therewith are fair and reasonable insofar as shareholders are concerned,” Savannah Energy added.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
