Twelve Seas Investment Company (BROG), announced this morning that they have entered into a business combination agreement to combine with Brooge Petroleum and Gas Investment Company (“BPGIC”), a United Arab Emirates (UAE) company in the oil storage and services business.  The transaction is being valued at approximately $1 billion.

Brooge Petroleum and Gas Investment Company (“BPGIC”), was founded in 2013 to capitalize on an anticipated need for oil storage capacity at the Port of Fujairah, in the UAE, which was anticipated to become an important oil hub. Today, the Port of Fujairah is a key strategic trading node globally. BPGIC is developing terminals in phases and aims to have a total capacity of 1 million m^3 following the scheduled completion of the second phase of construction by late Q2 or early Q3 in 2020.

Under the terms of the transaction, shareholders of the UAE company will sell 100% of its equity interests to Twelve Seas in exchange for total consideration of 100.0 million Twelve Seas ordinary shares, provided that at the election of the UAE company, up to 40% of the Closing Proceeds may be paid as cash consideration instead of Twelve Seas shares. All cash remaining in Twelve Seas at the closing of the Transaction is expected to be used for the UAE company’s growth.

Following the closing of the Transaction, BPGIC will continue to be led by its current management team with Mr. Nicolaas Paardenkooper as Chief Executive Officer, Miss. Lina Saheb, as Chief Strategy Officer, and Faisal El Selim as Chief Marketing Officer. BPGIC will remain headquartered in Fujairah, UAE.

Twelve Seas expects the Transaction to close at the end of the second quarter 2019 or early third quarter of 2019 with a closing condition that requires Twelve Seas to have net cash proceeds at closing (after payment of expenses and redemptions from Twelve Seas’ trust account), including any proceeds of any new equity financings (“Closing Proceeds”), in excess of $125 million.

Quick Takes: So far, Twelve Seas has only filed a press release without a presentation or without a scheduled investor conference call, so the specifics of this transaction are slim.  However, there was an 8-K filed on FRIDAY (April 12th), announcing Twelve Seas’ symbols would be changing to NASDAQ: BROG, which was certainly curious. In fact, it would almost appear that the full deal announcement should have been filed and released on Friday along with the symbol change, but as we know, a late Friday deal announcement never looks good since it tends to look like a company is trying to bury the story and hopes nobody notices.  Hence, maybe that explains why the symbol change and deal announcement were filed on different days.

Additionally, the one bit of information that was provided on BPGIC, states: “BPGIC is developing terminals in phases and aims to have a total capacity of 1 million m^3 following the scheduled completion of the second phase of construction by late Q2 or early Q3 in 2020.”  Per BPGIC’s website, Phase I was completed in November 2017, and their current capacity is 389,600m^3, with fourteen tanks.

Lastly, it appears that Twelve Seas is leaving the option open to do a PIPE since they state that the $125 million cash at closing condition  may “include any proceeds of any new equity financings“.  So rather than line up a PIPE prior to announcement (where they lock in a price at $10.00), this leaves them the option to see what the market’s reaction is to the deal and whether they need to do it at a lower price.

A further update will be provided once additional details, such as a presentation, have been provided.

THE TRANSACTION

CONSIDERATION:

BPGIC will receive:

• 100.0 million shares
  • 20.0 million of the shares will be placed into escrow and subject to achievement of certain milestones to be mutually agreed to.
  • BPGIC may exercise its right to elect for BPGIC shareholders to receive up to 40% of the Closing Proceeds in cash, in lieu of shares.

CONDITIONS TO CLOSING:

• Requires Twelve Seas to have net cash proceeds at closing (after payment of expenses and redemptions from Twelve Seas’ trust account), including any proceeds of any new equity financings (“Closing Proceeds”), in excess of $125 million.

ADVISORS

• EarlyBirdCapital, Inc. is acting as exclusive financial and capital markets advisor to Twelve Seas Investment Company.
• Ellenoff Grossman & Schole LLP is acting as Twelve Seas Investment Company’s legal advisors.
• K&L Gates is acting as legal advisors to BPGIC.
• Maples & Calder is acting as Cayman Islands legal counsel for the transaction.