Malaysia’s Hibiscus Petroleum, Southeast Asia’s first special purpose acquisition company (SPAC), is set to make its first purchase with a 35 percent stake in Middle East-based Lime Petroleum Ltd for USD55 million. Hibiscus, an oil and gas exploration and production company, raised 245 million ringgit (USD78.3 million) via an initial public offering in July 2011.
The transaction comprises of a new shares subscription agreement and an existing shares purchase agreement. Under the new shares subscription agreement, Hibiscus will acquire 27.2 percent equity stake in Lime Petroleum for USD50 million through the subscription of new shares at USD0.65 per share. Hibiscus will then acquire an additional 7.8 percent of existing Lime Petroleum shares from the latter’s current majority shareholder Rex Oil & Gas at USD0.23 per share. On top of that, Hibiscus will pay an additional USD5 million ‘discovery bonus’ to Rex on the first commercial discovery of oil.
Both the share subscription and existing share purchase agreements need the approval of Hibiscus' shareholders and the Malaysian market regulator Securities Commission for the transaction to be cleared.
RHB Investment Bank was the principal advisor to Hibiscus.
As a part of the agreement, Hibiscus will undertake all of Lime Petroleum’s operational function in each of the existing and future concession companies for a cost-plus seven percent contract. The management arrangement is valid for five years, and it is automatically renewed thereafter on an annual basis unless either party gives six months notice. If Lime Petroleum’s shares are listed on any stock exchange, the tenure will be three years from the date of listing and automatically renewed thereafter.
Hibiscus’ acquisition comes at a time when peer exploration company prices have deteriorated by almost 25 percent in the last six months. According to the company’s estimates, the market value of its 35 percent stake in Lime Petroleum would have been USD65 million based on the market in April 2011, compared to USD55 million it has agreed to pay.
Lime Petroleum currently has three concessions in the Middle East; and at least one more concession is expected to be secured by the end of 2011. It also has technology licence and funds of at least USD30 million in various companies with the group.
Hibiscus Petroleum is one of the few SPACs in Asia where these instruments are slowly gaining traction. SPACs are shell companies that go public with the sole purpose of using funds raised from IPOs to make one or more acquisitions in a pre-selected sector.
Besides Malaysia, Korea is the only country which has seen SPAC listings in its market. While Singapore also allows this, it has yet to have a SPAC listing.