Singapore’s Memstar Technology will acquire Chinese private natural gas developer Longmen Group Ltd for $420 million in a reverse takeover deal, the company said Monday in its filing with the local stock exchange. The deal, to be fully funded by shares, will see the Memstar, issue new share at 1.1615 cents each, to fund the acquisition of the private equity Longman Group.
Post the deal, Longmen will have an equity stake of 73.10 per cent in Memstar. The issue price represents a premium of approximately 7.24 per cent to the volume weighted average price of the shares of S$0.01506 on 28 November 2014, being the last market day preceding the date of the agreement.
As at 31 December 2013, based on a report by Netherland, Seawell & Associates, Inc. (NSAI), it is estimated that the Longmen Concessions contain proved and probable net gas reserves of approximately 190 billion cubic feet, with a present value of approximately $917 million.
Longmen also has a partnership with Petro China Company Limited, a subsidiary of China National Petroleum Corporation (CNPC), through a production sharing contract (PSC) to explore for, develop, produce, and sell CBM gas, in Hancheng, Shaanxi Province of China. The PSC is effective for 30 years, from March 2007, with Longmen holding 60 per cent participating interest and the remaining 40 per cent being held by Petro China.
The company also has a gas extraction agreement with the Hancheng Coal Mine Bureau for coal mine gas extraction in the Shanshuping, Xiayukou and Xiangshan coal mines, in Hancheng.
Longmen is majority-owned – 50.43 per cent – by LESS Longmen Co Ltd with the balance equity held by various private equity funds, including CKIF I (HK) Investment Limited, Aloe Environment Fund, WLR China Energy Infrastructure Fund LP, China Environment Fund III, Nanjing Hong Ding Investment Center (LP) and ZHJX (Nanjing).
LESS is a strategic fund of funds focused on investing in recycling, renewables, forestry and organic food production. Geographically, the funds which LESS invests in are primarily focused on China, India, North America, and Europe.