DNO International ASA (DNO) and UAE-based RAK Petroleum Public Company Limited (RAK Petroleum) have signed a heads of agreement to merge RAK Petroleum's Middle East and North Africa (MENA) operating subsidiaries into a subsidiary of DNO in exchange for DNO shares to be issued to RAK Petroleum. The consideration shares will be issued at a minimum share price of NOK 8.25 per share and a maximum share price of NOK 10.00 against a value of the RAK Petroleum MENA assets between USD 250 and 300 million.

The heads of agreement provides the basis of negotiation of definitive merger documents, including an integration agreement. It is intended that the transaction will be structured as a merger of two Norwegian subsidiaries of DNO and RAK Petroleum in accordance with Chapter 13 of the Norwegian Public Companies Act. The merger terms were proposed by DNO management last week and endorsed by the boards of directors of both companies on Sunday, with only the independent Norwegian directors involved in discussion and voting during the DNO deliberations.

Definitive agreements, once reached, will be presented to the shareholders of DNO and RAK Petroleum at separate extraordinary general meetings for final approval.

Helge Eide, DNO's Managing Director, said: 'We are delivering on our strategy for growth, and continue to build on our competence and solid track-record in the MENA region. The enlarged DNO will be a more robust company with higher production and stable cash flow from a more diversified portfolio.'

'Two very effective, skilled and experienced organizations will merge. I am excited about the opportunities for further expansion and value creation built through this merger,' he said.

The headquarters of the enlarged company will remain in Oslo, Norway; operations offices will be located in the Kurdistan Region of Iraq, Yemen, the United Arab Emirates, Tunisia and Oman.

DNO's board of directors has confirmed the intention to list the enlarged company on the London Stock Exchange in addition to the Oslo listing. A listing in London is expected to contribute to extended coverage of the company's shares, attract interest from a broader range of MENA focused investors and provide a solid platform for follow on merger and acquisition activity.

It is expected that, on transaction closing, RAK Petroleum will hold a total ownership interest in DNO of approximately 40 percent. RAK Petroleum currently holds a 30 per cent share in DNO. The number of shares to be issued by DNO to RAK Petroleum in consideration for the RAK MENA subsidiaries will be set by the parties based on relative valuations of DNO and the RAK MENA business. Final consideration will be negotiated and agreed between the parties and their advisors based on an evaluation of one or more competent person reports to be prepared by one or more independent, appropriate and reputable experts.

Tags: DNO International, RAK Petroleum