WestSide chairman Cheng Ye, who is also chairman of the $4.5 billion diversified Landbridge Group, has revealed that he had has earlier farm-in discussions with Armour, however no deal was finalised and discussions were terminated.
Spurned, Landbridge has launched its takeover offer, seeking at least 50.1% of Armour, a high hurdle considering Armour chairman Nick Mather's DGR Global (24.64%), US fund Och-Ziff Holding Corporation (9.51%) and Mather himself control more than a third of the company.
On Friday afternoon Armour told the Australian Securities Exchange that it had finalised definitive binding agreements with the US-based AEP which could see Armour pocket almost $40 million, be funded through a $US130 million phase one program and gain access to as much again in debt funding to pursue the potential of the McArthur Basin in the Northern Territory.
Armour's board has made the agreements conditional on shareholder approval.
The Chinese controlled WestSide had said that the AEP deal needed to be cancelled as one of the key conditions of its unsolicited takeover offer for Armour.
By putting it to a shareholder vote, Armour kicks the can to shareholders: if they think the AEP deal is bad, they can knock it back and buy into the WestSide offer, a move that will mean they most likely will no longer have access to the highly speculative NT permits.
WestSide could remove the condition if shareholders back the AEP deal, but it would do so knowing the relative strength of shareholder interest in AEP.
Armour's board has rejected the $A0.12 per share offer, and urged shareholders to do the same.
It says the WestSide bid values the company at $36.6 million, whereas the AEP deal implies Armour is worth $67.5 million on the AEP farm-in areas alone, and AEP is kicking in $40 million for a modest 9.9% share capital dilution together, which exceeds the total value of the Westside.
Armour says overall, the company is valued at $94 million, 2.5 times the WestSide bid.
Further, it says the WestSide bid comes with no value ascribed to the new Roma Shelf assets, which will cost it just $13 million, but come with reserves, resources and $250 million worth of infrastructure.
The AEP farm-in has been expanded from 21.5 million acres to 29.3 million acres with the addition of EP177 and EP178, and the farm-in amount boosted from $US100 million to $130 million for each of the two phases of exploration.
Phase one is expected to last up to five years, with AEP earning 75% in six licences by free-carrying all the work.
The increase of almost 10 million acres suggests recent rumours of a third deal between AEP and neighbouring leases owned by Santos, Hancock Prospecting or Pangaea Resources were wide of the mark.
The payments to Armour include an increase in payments due on close to $13 million, a further $3 million on the transfer of the new blocks, and $7 million on grant of one million acres of production licences, or grant and transfer of farm‐in interests in remaining Northern Territory tenements to American Energy.
An options package and the terms of a placement have also been increased.
The company should emerge with $33 million in the short-term, enough to resume production at its new Roma Shelf project in Queensland.
Armour has an offer from major shareholder DGR Global for $15 million to fund the Roma Shelf acquisition, but it is also looking at a mix of cash and debt.
The AEP conditions, including shareholder approval, need to be satisfied by October 31.
McClendon, who reportedly once vowed never to invest outside the US, said he was looking forward to applying what he had learned in unconventional resource development in North America during the past 10 years in Australia, to building a long term project in the McArthur Basin.
WestSide says it had made no decision on whether to withdraw its takeover offer, which it says offers a substantial premium to Armour's shareprice over the past year.
WestSide has no shares in Armour so far.
