Daylight Energy Ltd.

TSX : DAY
TSX : DAY.DB.C
TSX : DAY.DB.D


Daylight Energy Ltd.

October 09, 2011 13:19 ET

Daylight Energy Ltd. to be Acquired by Sinopec International Petroleum Exploration and Production Corporation

CALGARY, ALBERTA--(Marketwire - Oct. 9, 2011) - Daylight Energy Ltd. ("Daylight" or the "Corporation") (TSX:DAY) is pleased to announce that it has entered into an agreement (the "Arrangement Agreement") with Sinopec International Petroleum Exploration and Production Corporation ("SIPC") for the purchase of all of the issued and outstanding common shares of the Corporation (the "Common Shares") at a cash price of C$10.08 per Common Share, for total cash consideration of approximately C$2.2 billion. The transaction is to be completed by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"). The consideration offered for the Common Shares pursuant to the Arrangement represents a 43.6% premium over the 60-day weighted average trading price of the Common Shares on the Toronto Stock Exchange up to and including October 7, 2011. SIPC is a wholly owned subsidiary of China Petrochemical Corporation ("Sinopec Group") and undertakes overseas investments and operations in the upstream oil and gas sector. Sinopec Group is China's largest producer and supplier of oil products and major petrochemical products.

In addition, under the Arrangement and subject to approval by holders of the 10% series "C" convertible debentures (the "Series C Debentures"), all of the issued and outstanding Series C Debentures would be converted into Common Shares (at the C$9.60 conversion price applicable to the Series C Debentures, such that 104.1667 Common Shares would be issued for each $1,000 principal amount of Series C Debentures), and the holders of the Series C Debentures would then receive, in cash, the same C$10.08 per Common Share to be paid to the shareholders, plus accrued and unpaid interest on their Series C Debentures to the closing date.

SIPC would also, under the Arrangement and subject to approval by holders of the 6.25% series "D" convertible debentures (the "Series D Debentures"), acquire all of the issued and outstanding Series D Debentures for a cash price of C$1,110 per $1,000 of principal amount of Series D Debentures, plus accrued and unpaid interest to the closing date.

If the requisite approval of the Debentureholders is not obtained, the applicable (or both) series of Debentures will be excluded from the Arrangement and will remain outstanding in accordance with their terms.

"We are very pleased to announce this transaction and the considerable value it brings to our securityholders. We believe this transaction with SIPC recognizes the highly attractive asset portfolio and exceptional team that we have assembled at Daylight. The efforts and accomplishments of this team will be built upon through increased investment in the business and acceleration of our development and exploration opportunities" said Anthony Lambert, President and Chief Executive Officer of Daylight.

THE ARRANGEMENT

The Arrangement is subject to customary conditions for a transaction of this nature, which include court and regulatory approvals, and the approval of 66 2/3% of Daylight shareholders represented in person or by proxy at a special meeting of Daylight shareholders to be called to consider the Arrangement. Debentureholder approval will also be sought at the meeting to allow the holders of the Series C and Series D Debentures (collectively, the "Debentures") to participate in the Arrangement in the manner described above.

The holders of the Series C Debentures and Series D Debentures will each vote on the Arrangement as a separate class of securities, and participation in the Arrangement by each class will require the affirmative vote of the majority of Debentureholders in number whose holdings collectively represent at least 66 2/3% of the aggregate principal amount of that class. However, completion of the Arrangement is not conditional on such approvals.

If the approval is not obtained, the applicable (or both) series of Debentures will be excluded from the Arrangement and will remain outstanding following closing of the Arrangement. In that case, in accordance with the terms of the indenture governing the Debentures, SIPC will be required to make an offer to purchase the series of Debentures which are not dealt with pursuant to the Arrangement for cash consideration equal to 101% of the face value thereof, plus accrued and unpaid interest, within 30 days following the effective date of the Arrangement.

An information circular regarding the Arrangement is expected to be mailed to security holders in November 2011 for a special meeting of the holders of Common Shares and Debentures scheduled to take place in December, with closing expected to occur prior to the end of December 2011.

The Arrangement Agreement contains a reciprocal non-completion fee of C$100 million, which is payable by either party in certain circumstances if the Arrangement is not completed.

The previously announced $0.05 per Common Share dividend payable to holders of record on September 30, 2011 will be paid on October 17, 2011, but under the Arrangement Agreement Daylight has agreed to suspend future dividends.

A copy of the Arrangement Agreement will be filed on Daylight's SEDAR profile and will be available for viewing at www.sedar.com.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors of Daylight, after consulting with its financial and legal advisors, has unanimously approved the Arrangement and unanimously determined that the transaction is in the best interests of Daylight and is fair to Daylight shareholders and Debentureholders. The financial advisors to Daylight's Board of Directors have provided opinions that, subject to the assumptions, limitations and qualifications set forth therein, the consideration to be received by the holders of Common Shares and Debentures under the Arrangement is fair, from a financial point of view, to such holders. The Board of Directors of Daylight unanimously recommends that all Daylight securityholders vote in favour of the Arrangement at the securityholder meetings to be called to consider the Arrangement.

The Board of Directors and officers of Daylight intend to vote their respective Common Shares, totaling approximately 6.7 million Common Shares, in favour of the Arrangement, and have entered into lock-up agreements with SIPC pursuant to which they have agreed to, among other things, vote their Common Shares in favour of the Arrangement.

ADVISORS

Canaccord Genuity Corp. is acting as exclusive financial advisor to Daylight in the transaction and has provided the Board of Directors of Daylight with an opinion regarding the proposed transaction. CIBC World Markets Inc. is also acting as financial advisor to the Board of Directors of Daylight and provided an opinion regarding the proposed transaction. A copy of each opinion will be included in the information circular to be sent to Daylight securityholders for the special meetings to be called to consider the Arrangement. Blake, Cassels & Graydon LLP is acting as legal counsel to Daylight. Barclays Capital is acting as financial advisor to SIPC, and Vinson & Elkins LLP and Bennett Jones LLP are acting as legal counsel to SIPC.

ABOUT DAYLIGHT ENERGY

Daylight is a growing intermediate oil and liquids rich natural gas producing company with a high quality suite of resource play assets in Western Canada. Daylight has approximately 213 million Common Shares currently outstanding which trade on the TSX under the symbol "DAY". Daylight's Series C and Series D Debentures also trade on the TSX under the symbols DAY.DB.C and DAY.DB.D, respectively.

All amounts stated herein are in Canadian dollars.

ADVISORY:

Forward-Looking Information and Statements

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this press release contains forward-looking statements and information concerning: the anticipated benefits of the Arrangement to Daylight and its securityholders, the timing and anticipated receipt of required regulatory, court, Government of China and securityholder approvals for the Arrangement; the ability of Daylight and SIPC to satisfy the other conditions to, and to complete, the Arrangement; and the anticipated timing of the mailing of the information circular regarding the Arrangement and the closing of the Arrangement.

In respect of the forward-looking statements and information concerning the anticipated completion of the proposed Arrangement and the anticipated timing for completion of the Arrangement, Daylight has provided such in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the time required to prepare and mail Daylight securityholder meeting materials, including the required information circular; the ability of the parties to receive, in a timely manner, the necessary regulatory, court, securityholder and other third party approvals, including but not limited to approvals required to be obtained by SIPC from the Government of The People's Republic of China and Investment Canada Act approval; and the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Arrangement. These dates may change for a number of reasons, including unforeseen delays in preparing meeting materials, inability to secure necessary securityholder, regulatory, court or other third party approvals in the time assumed or the need for additional time to satisfy the other conditions to the completion of the Arrangement. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this press release concerning these times.

Risks and uncertainties inherent in the nature of the Arrangement include the failure of Daylight or SIPC to obtain necessary securityholder, regulatory, court and other third party approvals, or to otherwise satisfy the conditions to the Arrangement, in a timely manner, or at all. Failure to so obtain such approvals, or the failure of Daylight or SIPC to otherwise satisfy the conditions to the Arrangement, may result in the Arrangement not being completed on the proposed terms, or at all. In addition, the failure of Daylight to comply with the terms of the Arrangement Agreement may result in Daylight being required to pay a non-completion or other fee to SIPC, the result of which could have a material adverse effect on Daylight's financial position and results of operations and its ability to fund growth prospects and current operations.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of Daylight are included in reports on file with applicable securities regulatory authorities, including but not limited to; Daylight's Annual Information Form for the year ended December 31, 2010 and the Daylight's Notice of Annual General Meeting and Information Circular and Proxy Statement dated April 14, 2011, each of which may be accessed on Daylight' SEDAR profile at www.sedar.com

The forward-looking statements and information contained in this press release are made as of the date hereof and Daylight undertake no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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