Delek Group Announces on Support Agreement for a Recommended Takeover of Ithaca Energy Inc.

TEL AVIV, Israel, Feb. 6, 2017 /PRNewswire/ -- Delek Group (TASE: DLEKG, US ADR: DGRLY) ("the Company") is hereby pleased to announce that as part of the Company's strategy to expand its international energy operations, on February 6, 2017, it signed an agreement with Ithaca Energy Inc. ("Ithaca") under which the Company will make an offer to purchase from all Ithaca shareholders all of Ithaca's share capital (including shares arising from exercising the convertible securities) not held by the Company  ("the Agreement"), at a price of CAD 1.95 per share and a total consideration of CAD 681 million (USD 524 million) ("the Offer") and will receive the support of Ithaca's Board of Directors for the process. The foregoing share price reflects Ithaca's value (100%) of CAD 841 million (approximately USD 647 million (including shares arising from exercising the convertible shares).

Ithaca is an independent UK oil and gas operator that owns producing oil and gas assets and assets under development. Ithaca's shares are traded on the Toronto Stock Exchange (TSX) and the Alternative Investment Market (AIM) in London under the symbol IAE, As of this date, the Company, through a wholly-owned foreign subsidiary, holds 19.7% of the share capital of Ithaca. After completion of the Offer, if completed, the Company will be the controlling shareholder of Ithaca. Ithaca's market value as of February 3, 2017 (excluding convertable securities), amounts to CAD 720 milion (USD 555 milion).

The main points are as follows:

• The Company or through a foreign subsidiary, will issue a cash takeover bid for all of Ithaca's share capital, including shares issued as the result of exercising convertible securities, at a price of CAD 1.95 per share. This price reflects a premium of 12% on the TSX closing price of Ithaca's shares on February 3, 2017 (CAD 1.74 per share).
• To review the Company's Offer, Ithaca's board of directors appointed a committee composed of independent directors. The committee reviewed the Offer in consultation, among others, with its financial advisor, RBC Capital Markets. Under the agreement and according to the committee's recommendation, Ithaca's Board of Directors, without Delek Group representatives, approved the Offer unanimously, determining that it is fair, reasonable and to the benefit of Ithaca and its shareholders, and accordingly, it unanimously recommends that the shareholders accept the Offer regarding their shares.
• The Offer is issued to all Ithaca's shareholders and under the Canadian securities laws. For completion of the transaction, the Company will publish the takeover bid circular which is expected to be made available in March 2017 together with the recommendation of Ithaca's Board of Directors. After publication the takeover bid circular will be open to the public for a period of at least 35 days.
• Take up and payment for the shares is subject to a minimum tender condition that requires more than 50% of the shares being deposited pursuant to the Offer (excluding shares already owned by the Company's subsidiary), namely 40% of Ithaca's share capital. If the Company fails to receive a response regarding the foregoing quantity, the Offer will not be accepted. For any acceptance above the above quantity, the Company is obligated to purchase the responded shares. With a response of more than 90% of Ithaca's share capital, the Company will have a right to execute compulsory acquisition of the remaining shares and delist Ithaca's shares from trading. There is no obligation to the Company to undertake any form of subsequent acquisition transaction to acquire the remaining shares of Ithaca.
• The purchase is subject to customary closing condition, including receipt  all necessary regulatory approvals.
• Under the Agreement, the Company confirmed to Ithaca that it has sufficient resources available to fund the cash consideration for all of the shares acquired pursuant to the Offer and for all payments that may be demanded from Ithaca as a result of change of control in the Company, as mentioned below.
• The total consideration for the Offer, assuming that all convertible securities of Ithaca are converted to shares and all shareholders accept the Offer, is USD 524 million. The Company intends to finance the Offer from its independent sources, inter alia, as per the Company's cash balance and expected cash flows of future assets divestments.
• Ithaca's foregoing short-medium term debt may be called upon due to fulfillment of change of control customary provisions in existing agreements to which Ithaca is a party. Ithaca is acting to mitigate the requirement for any amount that may be demanded and the main amounts are USD 300 million high yield bond and USD 300 million RBL. The Company intends to act together with Ithaca to obtain interim finance to repay Ithaca's bond, if called for immediate redemption, and to receive waivers from banks and additional entities. For this purpose, the Company engaged with UBS Limited as a financial advisor. UBS Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom.
• The Agreement provides for, among other things, a customary Ithaca's Board of Directors support condition, a non-solicitation covenant, the Company's "right to match" the price if a competing offer is received, and provisions which provides for the payment by Ithaca to the Company of a termination payment of approximately CAD 17 million in certain circumstances, including if Ithaca completes an alternative acquisition within 8 months following the termination of the Agreement.
• Ithaca's shares are traded on the Toronto Stock Exchange (TSX) and the Alternative Investment Market (AIM) in London under the symbol IAE. The consideration for the transaction was determined in negotiations between the Company and Ithaca on the basis of Ithaca's share price on the Toronto Stock Exchange and as noted above, set at CAD 1.95 per share.
• For information regarding Ithaca, see section 1.7.21 in Part A of the Company's periodic report for 2015, as amended on May 30, 2016. (2016-01-037758) and visit Ithaca's website at: www.ithacaenergy.com.
• There is no certainty that the Offer set out in this report above will be completed and that a sufficient quantity will respond for completion of the Offer. The Offer is also subject to terms and there is no certainty that they will be met. The Company will issue another immediate report of any material development that occurs regarding the Offer.

Asaf Bartfeld, President and CEO of Delek Group: "Today, we are taking another significant step which, if successful, will firmly establish Delek Group as a global E&P company, with international oil and gas assets and strong operational capabilities. The Ithaca transaction will substantially strengthen our international operational arm, and is a synergistic step to our existing activities. We believe Ithaca will contribute to our continued growth and we look forward to reinforcing and building on our status in international markets."

This is a convenience translation of the original HEBREW immediate report issued to the Tel Aviv Stock Exchange by the Company on February 6, 2017.

About The Delek Group

The Delek Group, Israel's dominant integrated energy company, is the pioneering leader of the natural gas exploration and production activities that are transforming the Eastern Mediterranean's Levant Basin into one of the energy industry's most promising emerging regions. Having discovered Tamar and Leviathan, two of the world's largest natural gas finds since 2000, Delek and its partners are now developing a balanced, world-class portfolio of exploration, development and production assets with total gross natural gas resources discovered since 2009 of approximately 40 TCF.

In addition, Delek Group has a number of assets in downstream energy, water desalination, and in the finance sector.

For more information on Delek Group please visit www.delek-group.com

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