TEAL Exploration & Mining Incorporated has entered into a definitive agreement with African Rainbow Minerals Limited and Companhia Vale do Rio Doce relating to the proposed acquisition of all of the outstanding common shares of TEAL not already owned by ARM, pursuant to a court approved plan of arrangement at a price of C$3.00 per common share.
The cash purchase price will be funded by way of an equity investment by Vale into the consolidated operations of TEAL.
TEAL has also been informed that concurrently with the Arrangement, ARM intends to form a 50:50 joint venture with Vale for the future development and operation of TEAL’s assets. These assets include exploration and development programs for copper and cobalt in Zambia and the Democratic Republic of Congo, as well as a gold exploration program in Namibia. ARM currently holds approximately 65% of TEAL and proposes to establish this joint venture through a series of inter-conditional transaction steps.
The offer price represents a premium of: (i) 400% over the closing price, which was C$0.60, of the TEAL shares on the Toronto Stock Exchange (“TSX”) on December 12, 2008; (ii) 831% over the 30-day volume weighted average price of the TEAL shares on the TSX for the period ended December 12, 2008; and (iii) 123% over the 120-day volume weighted average price of the TEAL shares on the TSX for the period ended December 12, 2008.
The Board of Directors of TEAL established a committee of directors independent of ARM (the “Independent Committee”), comprised of George Jones (Chair), Norman Hardie and Murray Hitzman, to evaluate the proposed transaction and make a recommendation to the TEAL Board of Directors. The Independent Committee retained CIBC World Markets as its independent financial advisor to prepare a formal valuation of TEAL’s shares. CIBC World Markets established a valuation range of C$1.73 to C$3.06 per TEAL common share. CIBC World Markets also delivered an opinion to the Independent Committee that the consideration to be received by the shareholders of TEAL other than ARM (the “Minority Shareholders”) pursuant to the Arrangement is fair, from a financial point of view, to the Minority Shareholders.
The Independent Committee unanimously recommended that the full Board of Directors approve the transaction, authorize TEAL to enter into the Arrangement Agreement, and recommend that the Minority Shareholders vote in favour of the Arrangement. Following the receipt of the recommendation of the Independent Committee, the Board of Directors of TEAL (other than certain directors abstaining due to their relationship with ARM) unanimously recommended that shareholders vote in favour of the Arrangement.
Completion of the transaction is subject to a number of conditions, including receipt of certain regulatory approvals, as well as approval at a meeting of the shareholders of TEAL by (i) two-thirds of the votes cast by holders of TEAL shares in attendance at the meeting by person or by proxy, and (ii) a majority of the votes cast by Minority Shareholders. The Arrangement is also subject to approval by the Supreme Court of the Yukon Territory at a hearing to consider the fairness of the Arrangement.
The Arrangement Agreement includes customary exclusivity and non-solicitation covenants and matching rights, and provides for the payment by TEAL to Vale of a break fee of approximately C$2.5 million in certain circumstances.
TEAL currently expects that the special meeting of shareholders to consider the Arrangement will be held in February 2009. Prior to the special meeting, TEAL will mail to all shareholders, before the end of January 2009, a management information circular containing further information about the proposed transaction, including the full text of the formal valuation referred to above. Shareholders are encouraged to review these documents in their entirety. If the Arrangement is approved at the special meeting of TEAL shareholders and all other conditions precedent to the Arrangement are satisfied or waived, as applicable, TEAL currently expects to complete the Arrangement prior to March 30, 2009.
Fasken Martineau DuMoulin LLP is acting as counsel to TEAL and McMillan LLP is acting as counsel to the Independent Committee in connection with the transaction.