Shapir Engineering and Industry Ltd. (TASE:SPEN) is acquiring up to 25% of the Givot Olam Oil Exploration LP (TASE:GIVO.L) partnership for a price that could reach $5 million. The two companies have signed a memorandum of understanding, according to which Shapir Engineering will initially buy 10% of the general partner for $1.3 million, and will receive an option to buy 15% more for up to $3.775 million. If Shapir Engineering decides against exercising its option, it has a put option to sell the shares it buys in the first stage of the deal at the same price that it paid.
If Shapir Engineering exercises its option to buy 15% more of the partnership, it will receive the management rights to Givot Olam. This call option is valid for six months, starting on December 1. It was agreed that the parties would consider exchanging the call option for an actual purchase of the shares. The Givot Olam participation units were put on the Tel Aviv Stock Exchange (TASE) maintenance list after their price fell below NIS 0.01.
Shapir Engineering CFO Amit Birman said, "As we have previously reported, Shapir Engineering has been recently considering various oil and gas investments, an area that is synergetic to the company's core business, and the current investment is part of this plan. Givot Olam has a proven oil field that has produced commercial quantities of oil in the past, and its activity is currently suspended for technical and legal reasons. Shapir Engineering has the right managerial and engineering capabilities to make the partnership active again, and make it a revenue-generating asset for the partners."
Shapir Engineering will be entitled to appoint a director to the general partner's board of directors as long as it owns 10% or more of the general partner's shares.
The parties have agreed to continue their negotiations for the purpose of formulating understandings into a detailed and binding agreement between the general partner's shareholders. It was agreed, however, that if the parties do not sign a such a detailed agreement within 90 days of signing the memorandum of understanding, the memorandum of understandings will constitute a binding agreement between the parties for all intents and purposes.
If Shapir Engineering exercises its call option and reaches a 25% holding in Givot Olam, it will obtain the management rights in the partnership and the remuneration for this management. The structure of the partnership's board of directors will be changed, with the number of directors being set at seven, two of whom Shapir Engineering will be entitled to appoint. One of the two Shapir Engineering directors will serve as chairman. There will be two independent directors and two external directors.
The two Shapir Engineering representatives on the board of directors will be appointed to the professional operations committee, which will have a total of three members. Shapir Engineering will have the right to intervene in decisions requiring its approval and the approval of the other shareholders, including the recruitment of new partners, issuing shares in the general partner, changing the partnership agreement, revising the general partner's articles of association, and restrictions in transferring shares.
The two parties undertook not to appeal to third parties, and to conduct no negotiations whatsoever concerning the sale of shares in the general partner before the option expires on June 1, 2018.
Givot Olam is a limited partnership. Trading in its securities on the TASE is currently suspended. The partnership has drilling licenses in the Meged oil field near Rosh HaAyin, from which commercial quantities of oil have been produced. The partnership is currently focusing on developing the Meged 5 and Meged 6 drilling licenses, in which activity has been suspended, due to technical malfunctions (Meged 5) and waiting for production tests (Meged 6). In its announcement, Shapir Engineering says that its investment in Givot Olam is likely to help the partnership renew its activity and develop its oil assets.
Published by Globes [online], Israel Business News - www.globes-online.com - on August 27, 2017
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