On 2 November 2022, Hurricane Energy Plc, in which Crystal Amber (CRS) holds a 28.9% interest, announced that it had received an unsolicited offer for the company and that following a period of engagement with the bidder Hurricane had received an offer for the entire issued share capital of the Company at an indicative offer of 7.7p per Hurricane share in cash. In the Hurricane announcement, Hurricane’s Board stated that it had concluded that the indicative offer should not be recommended to Hurricane shareholders and that it had decided to launch a formal sale process to establish whether there is a bidder prepared to offer a value the Hurricane Board considers attractive, relative to the standalone prospects of Hurricane as a publicly listed company, and one that should be recommended to all Hurricane Shareholders.
In its announcement, Hurricane stated that whilst the outcome of the formal sale process is uncertain, it is in a very strong financial and operational position but noted that Crystal Amber, which holds 28.9% of Hurricane’s shares and is Hurricane’s largest shareholder, has indicated to the Hurricane Board its desire to monetise the value of its shareholding. Crystal Amber, by virtue of the size of its holding, is presumed by The Takeover Panel to be acting in concert with Hurricane.
Should the formal sale process result in an offer for Hurricane and the realisation of the Fund’s holding at the indicative offer price of 7.7p a share, it would amount to £44.3 million or 53.2p per Crystal Amber share.
A significant capital return in the absence of a sale
In the Announcement, Hurricane’s Board stated that in the event that the formal sale process does not result in a transaction, it intends to commence a significant capital return programme with up to US$70m (equivalent to 3.1p per Hurricane share at current exchange rates) to be returned to shareholders in the first quarter of 2023, upon completion of a capital reduction by Hurricane which would require the approval of Hurricane shareholders and confirmation by the High Court of Justice in England and Wales.
In the event that US$70 million is returned to Hurricane shareholders and there is no change in the US$:£STG exchange rate, Crystal Amber would receive approximately £17.8m, equivalent to 21.4p per Crystal Amber share. Furthermore, Hurricane has announced that in the absence of alternatives that would generate better returns for Hurricane shareholders, further distributions totalling up to US$110m could be made during 2023 and 2024 in aggregate, with a final distribution of up to US$30m in 2025, following the cessation of production from the Lancaster operations.
Hurricane further advised that the amount of cash available to distribute to Hurricane shareholders following cessation of operations and decommissioning is dependent on many factors, including oil price, ultimate oil recovery from Lancaster, whether the decision to cease operations is planned or forced and the cost and timing of decommissioning.
The quantum and timing of receipts from the Fund’s shareholding in Hurricane will depend upon the outcome of the formal sale process. It is the Fund’s current intention for substantially all proceeds received following the conclusion of the formal sale process and/or capital distributions, to be returned to shareholders.
Update on De la Rue
Crystal Amber continues to push for progress at De la Rue. On 9 November 2022, it published an open letter to all De la Rue shareholders, which makes interesting reading. Rather than copy and paste the test, click here to see the letter in full.
Update on Board Intelligence
CRS says that it has agreed to dispose of its shareholding in Board Intelligence Limited (BI), a private unquoted company. The Fund acquired its shareholding in the spring of 2018. In 2020, the Fund made a partial disposal of its shareholding. At 30 June 2022, the carrying value of the Fund’s remaining shareholding was £1.25m. The sale proceeds will amount to £2.0m, 60% above carrying value. The total profit from the Fund’s investment in BI is £1.48m, which represents a return of 39.9%.
Interim dividend
CRS’s board has decided that, rather than waiting for the outcome of the Hurricane sale process, it should now resume its returns to shareholders. An interim dividend of 10p per share in respect of the financial year ended 30 June 2023 is therefore being declared. This will be payable to shareholders on the register as at 25 November 2022, with an ex-dividend date of 24 November 2022 and a payment date of 23 December 2022. The interim dividend of 10p per share represents a gross return of £8.3m and will bring total distributions to shareholders in 2022 to 30p per share, representing a gross return of £25m.