Imperial Helium Corp (TSX-V:IHC, OTCQB:IMPHF) and Royal Helium (TSX-V:RHC, OTCQB:RHCCF)revealed that they struck an agreement on May 2, 2022, to action the arm's length acquisition of Imperial by Royal through a plan of arrangement.
Under the terms of the arrangement, Imperial shareholders will receive 0.614 of a Royal common share for every Imperial share they hold, which equates to a 10.01% premium for Imperial shareholders based on the closing price for Imperial and Royal on April 29, 2022.
In a statement, Imperial Helium co-chairman Kyler Hardy said: "Imperial sees this agreement as an opportunity to be a part of a bigger and stronger helium exploration and development company.”
He added: “Following Royal's successful exploration campaign at Climax, they have completed some tremendous work to make helium production in Canada a near term reality and the addition of the Steveville property will further assist in achieving this goal.”
The companies highlighted the following benefits that would flow to their respective shareholders:
- The agreement represents an attractive opportunity for Imperial shareholders to own shares in a larger, more liquid publicly traded entity at an exchange ratio that implies a 10.01% premium to the current trading price of Imperial shares;
- Allows Imperial shareholders to participate in the exploration and development growth upside with Royal's over one-million-acre helium land base comprised of over 10 separate potential helium fairways that have seen over $20 million of capital investment to date in the form of magnetic surveys, seismic surveys, geoscience and exploration drilling;
- Creates a larger entity with increased access to capital to enable the financing of ongoing exploration, development and processing plant expenditures;
- Represents the accretive acquisition of two ready-to-produce helium wells to bring on production along with Royal's Climax wells;
- Creates a consolidation of additional helium exploration and development opportunities with Imperial shareholders likely to realize the benefit of being early shareholders;
- Creates an entity with significant indicative helium capacity enabling the expedition of offtake discussions and increased opportunity to monetize assets;
- Materially reduces Royal and Imperial's aggregate general and admin costs.
Arrangement details
Following the agreement, Royal will acquire all the issued and outstanding Imperial shares by way of a statutory plan of arrangement. Imperial shareholders will receive 0.614 of a Royal share for every Imperial share. Imperial shareholders will retain a “meaningful stake” in the combined entity and exposure to the continued success of the combined company, noted Imperial.
Pursuant to the arrangement, outstanding stock options to acquire Imperial shares will be exchanged for options to acquire Royal shares, at numbers and exercise prices adjusted for the exchange ratio, and exercisable for a period of 30 days following closing.
Significantly, a special meeting of Imperial shareholders will have to approve the proposed arrangement in the second half of June 2022, by a majority of not less than two-thirds of the votes cast by the shareholders. Imperial’s management and insiders hold around 16% of the firm’s outstanding shares and have forged support agreements under which they have agreed to vote in favour of the arrangement.
Once approved, the deal will close shortly thereafter.
At closing, Royal’s board will expand to include one additional member from Imperial's board and the board will then be led by current Royal chairman Andrew Davidson.
The arrangement agreement includes a break fee of $1 million payable by Imperial to Royal.
Eight Capital is acting as financial advisor to Imperial, while Borden Ladner Gervais LLP is acting as the firm’s legal advisor.
Imperial is focused on the development of helium assets in North America, initially through the expected commercialization of its Steveville, Alberta helium discovery.
Royal Helium CEO Andrew Davidson said: "The Steveville property, along with all of the other properties that Imperial has been targeting, make an accretive addition to Royal's near-term Climax field...This acquisition would allow Royal to initiate production and significant cash flow from multiple fields.”
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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