Hvidtsted & Partners

A Leveraged buyout in the making

(English below) Vi søger en eller flere medinvestorer til en planlagt erhvervelse af et vestligt børsnoteret energiselskab med væsentlige aktiver i flere stabile afrikanske lande.

Case:

  • Forventet budpris: USD 1,2 milliarder.
  • Årligt Frit Cash Flow: USD 200 millioner, forventes at stige til USD 300 millioner i 2026 og USD 500 millioner i 2029.
  • Nettogæld: Ingen.
  • Estimeret Afkast: Over 35% IRR, baseret på nuværende pengestrømme, udvikling af aktiver og oliepriser på nuværende niveauer.
    Faktorer som inflationsudsigter underbygget af penge-, finans- og sikkerhedspolitik samt udbud/efterspørgsel påvirket af ødelagt
    russisk eksportkapacitet og generel underinvestering i olie og gas forventes at muliggøre væsentlige prisstigninger på olie, hvilket tilbyder yderligere upside på casens afkast, hvis oliepriserne stiger.
  • Transaktionsstruktur: Leveraged buyout, hvor købet finansieres med selskabets kontanter, 70-80% gennem gældsfinansiering, 
    og et mindre indskudt beløb fra co-investor, som vi tilbyder 40%-60% ejerskab afhængig af finansieringsmuligheder.
  • Foreslået rolle for co-investor: Vi foreslår, at I (co-investor) yder en mindre garanti for lånekapitalen som betingelse for at blive medinvestor, samt en minimumsinvestering på 280 millioner USD for et 40% ejerskab. Dette beløb kan anses som købsprisen for aktiverne, og selskabets pengestrømme rækker til at afvikle lånet.

Næste Skridt: Vi ønsker at præsentere casen i detaljer for at facilitere et muligt samarbejde. 
For at gå videre ønsker vi at indgå en eksklusivitets- og fortrolighedsaftale, der sikrer, at alle oplysninger deles i et fortroligt miljø, og sikrer, at prisen på overtagelsesmålet ikke bliver negativt påvirket.

More details in English:

Description:

This Leveraged Buyout (LBO) proposal aims to privatize an energy company, listed in Canada targeting a +40% Internal Rate of Return (IRR) over a 6-9 year holding period, with an initial investment (equity) of ~240 million US dollars, for a total investment of 1.2 billion US dollars, and with optionality to expand the investment size by acquiring additional smaller companies ripe for an acquisition.

The investment’s security is anchored by several factors: the price point of the already cash-flowing African assets which alone justifies the 1.2 billion bid; the unlocking of value from other assets being developed by a major partner which is expected to be cash-flowing as 2026 starts, which has about the same NPV or higher given the gigantic potential of this venture and its expected additions. Other assets account for roughly 3-500 million dollars in NPV.

The target company remains a robust investment due to its Nigerian producing assets, which operate at a break-even point well below current commodity prices, and LBO financing commitments remain robust even if today’s prices fall up to 35%. Further, we expect prices to go up instead, meaning a greater cushion to pay back financial obligation. We expect stable production from these existing assets for at least the next decade, ensuring approxiatemately 200 million in annual free cash-flow at current commodity prices. With upside from other developments.

Geopolitical risk is reduced by the target company’s geographical diversification across multiple African jurisdictions as seen above; co-ownership with international well established companies, along with influential partners of the local states, such as national companies in Nigeria and Namibia;

We expect the oil-price to trend strongly upwards in the coming decade given the global fiscal-, monetary-, and defence policies driven by geopolitical needs. Money issuance, and many years of lower investment in oil-and gas has skewed the supply/demand, such that we might see a doubling of the oil-price in this period. These policies along with lacklustre real green alternatives ensure the relevance of oil and gas in the global energy mix for the coming 50 years based on earlier historical energy transitions, and the current speed of changing the energy mix. This despite the clearly recognizable strongly needed shift towards greener alternatives.

Broad exclusion of all fossil fuels from being investable is a misunderstood policy that results in more CO2 pollution than with a nuanced view of fossil fuels, and realistic expectations of green alternatives, their lifecycle and storage capabilities. For example, coal usage is at an all-time high and growing on the back of its low pay-back period, even though it is clearly a worse polluter than burning natural gas, and as such should be phased out before gas rather than all fossil fuels being equally non-investable by several market participants. This misunderstanding is the core reason for the attractive price on these assets, and why it is ethically defensible to invest. Oil and gas is needed for quite some years still to enable a stable and secure transition to green alternatives without major setbacks in the form of for example coal.