AIM darling Tethys Petroleum (LSE: TPL) is in the news today after the company’s potential acquirer, Nostrum Oil and Gas, withdrew its proposed offer to buy the company.
Nostrum’s offer to buy Tethys was agreed in principle back during September. But the deal has now fallen apart, as it turns out that Tethys’ largest shareholder, Pope Asset Management LLC, did not support the proposed transaction. Nostrum has stressed that the deal was conditional on Tethys’ three largest shareholders agreeing to the offer.
As part of the buyout, Nostrum was also going to supply Tethys with $20m in interim funding for its subsidiary, Tethys Kazakhstan SA. This offer has now been withdrawn, which leaves the company with somewhat of a funding gap.
Tethys has warned that it does not currently have sufficient funding to meet its obligations over the coming 12 months. Without the $20m lifeline, management has warned that there would be significant doubt about Tethys’ ability to continue as a going concern.
However, Tethys has announced today that it has received a non-binding letter of intent from AGR Energy Holdings Limited in connection with a potential $20m equity fundraising. According to the press release on the matter, the letter of intent also suggests that AGR could provide a $5m loan to support short-term liquidity. While there’s no certainty that any short-term loan or equity raising will occur, it’s good to know that Tethys isn’t out of options just yet.
What’s more, even though Nostrum has dropped its offer to acquire Tethys for the time being, the company has hinted that it may return with another offer. Nostrum stated today that: “Nostrum reserves the right to propose alternative transactions to Tethys and/or to make an offer for the share capital of Tethys on different terms to those previously announced.”
So, Nostrum has stepped back, and AGR Energy has stepped forward, but there’s also another suitor in the mix.
Earlier this month, Olisol Investment Group came forward to offer Tethys $8m by way of share subscriptions. Moreover, Olisol has offered to make an additional $24m of new equity available to Tethys as part of the deal.
Olisol has already partnered with Tethys in its Aral Oil Terminal and, therefore, knows the company better than most.
Tethys acknowledged but politely declined Olisol’s offer when it was originally made at the beginning of this month, as the company was in a period of exclusivity with Nostrum. But now Olisol’s offer could be back on the table.
Indeed, when Olisol’s offer was initially put forward, the company’s management said it was “excited” by the prospect of investing in the company, and it looked “forward to entering into discussions with Tethys at the earliest possible moment”.
So it looks as if Tethys has an interesting future ahead of it. Even though Nostrum’s bid is now off the table, the company has a number of suitors willing to lend it the cash to push forward with its development plans.