PetroRio will purchase Dommo for BRL 1.85/share

In a model similar to the one used by Suzano in the acquisition of Fibria, a wholly-owned subsidiary of PetroRio will incorporate Dommo paying R$ 1.85 per share.

Dommo shareholders will be able to choose whether they want to receive cash or PetroRio shares, in an exchange ratio of 1 PRIO3 share for every 20 Dommo shares.

Dommo’s only asset is the right to receive 5% of the production from the Tubarão Martelo and Polvo fields in the form of royalties. The company received this right in exchange for selling 80% of Tubarão Martelo to PetroRio two years ago.

There is also an additional component: Dommo has accumulated losses of BRL 20 billion, which generate tax credits of around BRL 7 billion.

With the transaction, PetroRio now holds 100% of the economics of the two fields.

The transaction is the final chapter of an operation that Prisma – the asset manager special situations by Marcelo Hallack, João Mendes and Lucas Canhoto – he started riding years ago, since he bought the bonds from the old OSX3.

The manager – which owns 52% of Dommo’s capital – acquired this stake by first converting the bonds, then buying shares directly on the market, and finally buying the position of other creditors to convert into equity.

When he announced that he had taken control of Dommo, at the beginning of the year, the share was trading at R$0.45.

Since then, the share has quadrupled in the expectation that Prisma would value the asset through some M&A. The stock closed today at R$ 1.74 – in a rush in the final half hour of the trading session.

The transaction is a win-win-win, Prisma Capital’s João Mendes told the Brazil Journal. “It is good for us, for PetroRio and for the minority shareholders of Dommo, who will sell at the same price and under the same conditions as the controlling shareholder.”

The purchase of Dommo “is an important step towards the next phase of the campaign to revitalize the cluster of Polvo/Tubarão Martelo, which today produces 17,500 barrels a day,” said PetroRio CEO Roberto Monteiro.

Source: Neofeed