Neon, MEO eyeing merger

Neon Energy Limited and MEO Australia Limited today announced that they have entered into a Merger Implementation Agreement (“MIA”), under which they have agreed to merge by way of an MEO scheme of arrangement.

Under the Merger, MEO shareholders will receive 0.7369 Neon shares for each MEO share they hold. Following implementation of the Merger, Neon shareholders and MEO shareholders will each hold 50% of the Merged Group.

The transaction will combine Neon’s cash resources with MEO’s diverse portfolio to create a well- capitalised junior E&P company, positioned to take advantage of existing opportunities within the combined asset and new ventures portfolios as well as further business development opportunities in the E&P sector, MEO said in an announcement.

The Merger has the unanimous support of the Neon Board and the MEO Board.

“The Neon Board considers the Merger a superior alternative to the Evoworld offer. The Neon Directors recommend that Neon shareholders vote against the resolution to approve the Evoworld offer and against the resolutions to replace the current Neon Board with Evoworld’s nominees at the general meetings scheduled for 12 November 2014,” a statement reads.

Also, MEO said its Directors unanimously recommend that MEO shareholders vote in favour of the Merger and intend to vote all MEO shares they own or control in favour of the Merger, in each case in the absence of a superior proposal and subject to an independent expert opining that the Merger is in the best interests of MEO shareholders.

Neon’s Chairman, Alan Stein said: “With the strong cash position of the Merged Group along with prudent use of gearing, we will be well placed to pursue existing opportunities within the portfolio as well as meaningful acquisition
opportunities in an increasingly attractive market for E&P buyers. For a long period, the ASX has lacked junior E&P companies with sustainable business models and ownership of material production and cash flow.

Through a disciplined approach to acquisitions and ruthless focus on costs, our goal Is to materially enhance the net asset value of the group and to create an attractive investment destination for shareholders seeking exposure to the E&P sector. We think this is in stark contrast to Evoworld’s offer to opportunistically acquire Neon shareholders’ equity and gain control of Neon at a discount to the company’s cash backing.”

MEO’s Acting Chairman, Stephen Hopley, said: “Consolidation amongst emerging E&P companies is long overdue and makes strong strategic sense. The Merger provides MEO shareholders with the opportunity to retain exposure to a company with increased scale and capital to pursue value accretive growth opportunities. The Merger is also expected to result in a sharp reduction in the combined cost base of the Merged Group and arepositioning towards a production oriented strategy and strengthened platform from which to deliver future shareholder returns.”