SGX-listed Geo Energy Resources has entered a conditional sales and purchase agreement with Rajawali Group to acquire two companies — Indonesian-listed Golden Eagle Energy and Marga Bara Jaya — giving it a controlling stake and equity stake of 58.65% and 33% of the issued shares respectively.
The aggregate consideration to be paid for the acquisitions are US$154.1 million ($204.54 million) and US$49,500 respectively. The company intends to finance the acquisitions with internal cash resources and external financing, such as bank loans, according to a statement put out on July 26.
Golden Eagle Energy is a coal mining group with over 300 million tonnes of total proven and probable reserves in South Sumatra that is listed on the Indonesia stock exchange, while Marga Bara Jaya is an infrastructure company in South Sumatra. According to the report by Geo Energy, Marga Bara Jaya can supplement the performance of Golden Eagle Energy.
According to an independent qualified person’s report published early this year, Geo Energy's own three operating mines now have a total proven and probable reserves of 75.9 million tonnes. The rights to operate these three mines will expire between May 2027 and April 2031. A fourth mine, known as STT, is under development.
Under terms of the proposed acquistion, Geo Energy's stake in Golden Eagle Energy can rise to 75% subject to a full acceptance of a mandatory tender offer (MTO) made to the public shareholders. It also has an option to purchase an additional 25.70% stake in MBJ, which will bring the total consideration to around US$200 million.
Geo Energy claims that an acquisition of a controlling stake in the listed Golden Eagle Energy allows them to become one of the top coal producers in Indonesia with a mining life of over 20 years.
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It also secures ready-for-development world-class infrastructure in South Sumatra that provides access to lucrative international export markets for the TRA Asset and the surrounding coal mines.
The company plans to fund the deals via a combination of internal resources and loans.
On a pro forma basis, the deals, upon full completion, will reduce Geo Energy's NTA per share now at 39.24 cents to 26.42 cents.
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Basic earnings per share, meanwhile, will be slightly raised from 11.48 US cents to 12.55 US cents.
“These major acquisitions will transform the group to become one of the top coal players in Indonesia with long term sustainability of over 20 years mining life of reserves as well as strengthen our market presence globally," says Geo Energy's executive chairman and CEO Charles Antonny Melati.
"Furthermore, the new infrastructure will vertically integrate coal production with supply chain strength and unlock higher operational efficiency for the group," he adds.
“With reserves of more than 300 million tonnes, the group aims to expand its production to further fuel its strategic growth in the long term. Upon the completion of new infrastructure, the group will be able to ramp up production to up to 25 million tonnes per year with lower costs and greater operational efficiency,” says Melati.
The transaction will be subject to the group’s shareholders’ approval at an extraordinary general meeting (EGM).
Shares in Geo Energy Resources closed flat at 22 cents on July 26.
