Tuesday, January 2, 2018

Swala, Orca agree on 40pc acquisition of PanAfrican Energy for $130m

By Alawi Masare @AMasare malawi@tz.nationmedia.com

Dar es Salaam. Swala Oil & Gas (Tanzania) PLC has agreed with Orca Exploration Group Inc to acquire up to 40 per cent of Orca’s wholly-owned Mauritius subsidiary, PanAfrican Energy Corporation for a total consideration of up to $130 million.

Swala – the first oil and gas exploration company to be listed on the Dar es Salaam Stock Exchange - will acquire the firm through its subsidiary Swala (PAEM) Ltd (SPL).

PanAfrican Energy Corporation is the parent company of PanAfrican Energy Tanzania Limited which produces and sells natural gas from the Songo Songo block.

The acquisition financing has been arranged by Exotix Capital, a London-based specialist frontier markets investment bank, according to a statement issued on Tuesday January 2, 2018.

Exotix has placed a gross $25 million from US institutions under an early bird 144A USD bond offering, a first for a Tanzanian company.

“Tanzanian, East African and international investors will be accessed in January for a second tranche fundraising via a new Tanzanian bond and additional tapping of the 144A USD bond,” the company stated.

Swala conducted a roadshow in Uganda, Kenya and Tanzania in early-August and received significant investor interest.

The company has also submitted a prospectus for the issuance of $50 million USD-linked Tanzanian Shilling bonds (with greenshoe rights) for approval by the Capital Markets and Securities Authority (CMSA).

“This arrangement ultimately results in the benefits of more than 20 per cent of Orca’s Tanzania business being indirectly owned by Tanzanian shareholders and bondholders, providing an alternative mechanism for local participation alongside traditional listings on the DSE, and the recirculation of funds into the Tanzanian economy mean a lower demand on the country’s foreign currency reserves over the duration of the project,” stated Swala chief executive officer Dr David Mestres Ridge.

“Our investment in PAEM is transformational for Swala and the result of committed engagement by all parties. It also represents a number of firsts for Tanzania as part of Swala and Orca’s commitment to local participation in the Oil and Gas sector: it is the first deal of this magnitude between a foreign and a Tanzanian company; it is the first time that US dollar-linked bonds shall be listed on the DSE; and it is the first time that the Tanzanian pension and investment funds are invited to participate alongside international investors in these opportunities,” he added.

Of the $130 million, $16.3 million will be paid by issuing 16.3 million Preferred Shares to Orca, subject to shareholder approval at the company’s upcoming annual general meeting.

If the issuance of Preferred Shares is not approved, then Swala PAEM Ltd (SPL) shall pay Orca the equivalent amount in cash.

A further $24 million shall be satisfied by SPL assuming through its share ownership a pro-rata share of the obligations under an IFC loan agreement entered into by PAEM’s wholly-owned subsidiary, PanAfrican Energy Tanzania Limited.