Homeland to extend South African asset sale timeline
2009-02-09 09:20 ET - News Release
Mr. Stephen Coates reports
HOMELAND ENERGY AND GMR ENERGY IN DISCUSSION ON SALE OF SOUTH AFRICAN ASSETS; DEADLINE FOR DELIVERY OF SHARES EXTENDED
GMR Energy Ltd. of Bangalore, India (GMR), has requested an additional extension for the completion date by which Homeland Energy Group Ltd.'s Homeland Energy Corp. must repurchase the shares of the company's South African operations from GMR. GMR has cited the need to conclude discussions with its bankers as the reason for this extension.
Homeland and GMR are in discussion whereby GMR will purchase 100 per cent of Homeland's South African subsidiary, Homeland Mining & Energy, SA (Pty.) Ltd. (HMESA), for $80-million (U.S.) (approximately $98-million (Canadian)) less the $30-million (U.S.) (approximately $37-million (Canadian)) that GMR has invested to date. There are additional costs which GMR must bear, such as accounts receivable and surplus cash currently in the South Africa operations account, which will be settled upon closing of this transaction.
Both Homeland and GMR are actively working to complete discussions and enter into a binding agreement by Feb. 23, 2009, at which time GMR will make an initial payment of $10-million (U.S.) (approximately $12.5-million (Canadian)). The balance payment of $40-million (U.S.) (approximately $49-million (Canadian)) will be made upon closing of the transaction, and following receipt of required shareholder and regulatory approvals in Canada and in South Africa. In the event that a binding agreement is not finalized and the initial payment made by Feb. 23, 2009, Homeland reserves the right to issues the common shares as approved by Homeland shareholders in December.
Background
On April 17, 2008, GMR acquired a 5-per-cent interest in HMESA for $15-million (U.S.) with an option to purchase an additional 5 per cent and 40 per cent over time. On May 6, 2008, GMR acquired an additional 5 per cent of HMESA for $15-million (U.S.), bringing ownership of Homeland's South African subsidiary to 10 per cent for a total of $30-million (U.S.). On Nov. 5, 2008, GMR elected not to acquire the additional 40 per cent of HMESA as per the original agreement. Homeland Energy Corp. was required to repurchase GMR's 10-per-cent ownership in accordance with the terms of the option agreement, a value of $30-million (U.S.) payable in cash or shares of Homeland.
On Nov. 18, 2008, Homeland gave notice to GMR that the company intended to issue Homeland Energy Group shares at a price of approximately 45.5 Canadian cents per share as a means for Homeland to regain 100 per cent of HMESA to satisfy the repayment of GMR's $30-million (U.S.) investment for 10 per cent of HMESA. Homeland continued discussions with GMR on alternatives to the issue of shares and on Jan. 4 and Jan. 20 granted extensions to the share delivery date in order to accommodate these discussions.
