Seven Group Holdings (SVW) has signed a merger implementation agreement to acquire Nexus Energy through a scheme of arrangement.
Seven made an offer of 2c per share in cash, which is expected to close in June, subject to conditions including shareholder approval and court approval.
Seven said in a statement it will effectively replace Nexus' senior, and a majority of its unsecured, debt funding financiers. Nexus’ senior creditors include Nomura Special Investments Singapore and Merrill Lynch International.
The suitor will provide working capital to Nexus to continue its operations, including a bridge-loan facility of up to $40 million, effective immediately.
The majority of note holders have agreed to accept an offer of 89c plus accrued interest per dollar of the face value of their notes, which Seven will provide from current reserves.
Seven expects capital outlay over the medium term to be approximately $400 million, including $235 million on capital expenditure across the Longtom development, the Echuca Shoals drilling obligation and the Crux make-good obligation.
Outlay is also set to include $50 million to senior debt holders, $100 million to note holders, $5 million to capitalised interest and $33 million for the litigation settlement with Sedco.
Nexus' deadline to satisfy asset sale requirements is April 3, which Seven said it does not have a means of doing without the takeover proposal, and failure to do so could trigger lenders to call for cash collateralisation of certain letters of credit.
Herbert Smith Freehills was Seven’s legal adviser. Seven did not use an investment bank to advise it on acquisition. Nexus was advised by Deutsche Bank and Allen & Overy.
Seven executive chairman Kerry Stokes said the group's strong balance sheet provides the ability to act on investment opportunities that diversify its portfolio.
"The investment provides Seven Group Holdings with an opportunity to invest in a business with quality assets and with strong growth prospects that will provide long term value," Mr Stokes said.
"Realisation of the ultimate value of these assets will require substantial capital investment over time.
"This investment suits Seven Group Holdings' strategy to deploy capital in a sector in which Australia has a long-term comparative advantage."
Seven also said the proposal is in the best interests of Nexus shareholders and creditors.
Nexus chief executive officer Lucio Dello Martina said the board had faith in the value of Nexus’ assets and was disappointed that a better outcome was not able to be achieved for shareholders.
"The board believes the Seven Group Holdings proposal provides a return to shareholders which is not as dilutive as other alternatives that were considered by the board and which will provide essential immediate bridge funding to allow the company to continue operations," he said.
The two groups earlier admitted they had been in discussions after Seven chief executive Don Voelte stepped down as Nexus chairman last month, saying he faced conflict of interest issues.
A Nexus shareholders meeting is to be held in June to approve the takeover. Nexus shares have been suspended from trading on the Australian Securities Exchange since February 20 when they closed at 5.9c each.
Credit Suisse had a 11.6% stake in Nexus as of Novembr 15, 2013, according to Bloomberg data. Macquarie Group had a 7.77% stake in Nexus as of January 31, 2013, says Bloomberg