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Press release from Marketwire

CERF Incorporated and Winalta Inc. Announce Proposed Strategic Business Combination to Create a Leading Oilfield Rentals Provider

Thursday, June 26, 2014

CERF Incorporated and Winalta Inc. Announce Proposed Strategic Business Combination to Create a Leading Oilfield Rentals Provider

13:59 EDT Thursday, June 26, 2014

CALGARY, ALBERTA--(Marketwired - June 26, 2014) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

CERF Incorporated ("CERF") (TSX VENTURE:CFL) and Winalta Inc. ("Winalta") (TSX VENTURE:WTA) are pleased to announce that they have entered into a definitive arm's-length agreement (the "Agreement") to combine CERF's oilfield rentals business, waste management, and construction rentals businesses with Winalta's oilfield accommodation rentals business (the "Combination"). The combined company will operate under the name CERF and will continue to trade on the TSX Venture Exchange ("TSXV") under the symbol "CFL".

The Combination will be effected by way of a plan of arrangement (the "Arrangement") under the Business Corporations Act (Alberta) whereby Winalta shareholders will receive 0.3352 of a common share of CERF for each Winalta common share held (the "Exchange Ratio") resulting in approximately 14,456,717 CERF common shares being issued. Upon completion of the Combination, the current shareholders of CERF will own approximately 61% of the combined entity and the shareholders of Winalta will own approximately 39% on a fully diluted basis. Based on CERF's closing price on June 25, 2014 of $3.49, the Exchange Ratio equates to $1.17 per Winalta share.

STRATEGIC HIGHLIGHTS

A combination with Winalta will solidify CERF as a leading Canadian oilfield rentals provider with:

  • one of the largest and most diversified fleets of commercial, industrial and oilfield related rental equipment in Canada;
  • entry into the wellsite accommodations sector with size and scale resulting in critical mass in the high growth oilfield rentals sector in western Canada;
  • expanded geographic positioning and a more diverse suite of rental assets resulting in increased overall market penetration amongst a larger number of E&P clients; and
  • increased EBITDA margins and reduced cash flow volatility due to the contract backed nature of Winalta's integrated wellsite business.

In addition, the Combination should also provide strategic corporate benefits to CERF, including:

  • accretive to CERF shareholders on a net earnings and distributable cash flow per share basis, based on management estimates;
  • significant operational and marketing synergies among the combined oilfield rental divisions;
  • general and administrative cost saving synergies;
  • increased opportunities for consolidation in the oilfield rentals and accommodations business; and
  • the creation of a geographic presence across the majority of the key oil and gas resource plays in Canada.

CERF continues to focus its efforts on three core business lines encompassing oilfield rentals, construction rentals and waste and environmental services. Winalta's assets, client base, personnel, safety and operational performance meet CERF's criteria and deliver the oilfield accommodation rentals service lines CERF has been seeking.

Wayne Wadley, CERF's President and CEO, said "Winalta has assembled a quality wellsite accommodation fleet in Canada with an operations team that consistently achieves industry leading utilization and margins. We are excited about the operational synergies with our TRAC Energy Services oilfield rentals division and the future growth opportunities that will come as a result of the increasing demand for oilfield accommodations in western Canada."

Artie Kos, Winalta's Executive Chairman, said "The combination combines two companies with best-in-class assets to create one of the top rental companies in western Canada. CERF provides Winalta shareholders with increased liquidity in a growing company that has a history of consistently paying a high dividend and acquiring quality businesses."

The Boards of Directors of CERF and Winalta have approved the Agreement. Officers and Directors holding approximately 5.9 million shares, options and warrants of CERF (approximately 26% of the fully diluted shares outstanding) and 25.3 million shares and options of Winalta (approximately 59% of the fully diluted shares outstanding) have signed lock-up agreements in support of the Combination. The proposed Combination is subject to customary stock exchange, regulatory and court approvals as well as the approval of the holders of at least 66 2/3% of the outstanding shares of Winalta and, if required by the TSXV, the approval of a majority of the shareholders of CERF voting in person or by proxy at their respective special meetings of shareholders expected to be held in late August 2014. An information circular pertaining to the Combination is expected to be mailed by CERF and Winalta to their respective shareholders in late July 2014.

SUMMARY OF WINALTA

Winalta has assembled one of the premier wellsite accommodation fleets in the industry and has developed a brand that is known for providing exceptional service to its clients. Winalta is one of the largest wellsite providers in Western Canada, servicing its clients from locations in Stony Plain and Grande Prairie (Alberta) and in Estevan (Saskatchewan). Winalta currently employs 18 full time staff and operates 239 wellsites, 5 integrated wellsites, 31 geo labs and 10 drill camps across western Canada.

At an implied purchase price of approximately $65 million including net debt, CERF is acquiring Winalta at the following transaction metrics:

EV / 2014E EBITDA (1) 4.8x
EV / Replacement value of assets (1) 97%
(1) Based on Winalta management's internal estimates and estimated net debt (calculated as total interest bearing debt less cash) as at June 30, 2014

EXECUTIVE MANAGEMENT

The combined company will be led by an experienced executive management team, including:

  • Wayne Wadley, President & Chief Executive Officer
  • Ken Stephens, Chief Financial Officer
  • Austin Fraser, Executive VP Corporate Development
  • Skip Kerr, Chief Operating Officer

Artie Kos, Executive Chairman of Winalta, will continue in an ongoing advisory role with the combined company. David Hopley, Chief Financial Officer of Winalta, is expected to continue to work with the company on a transitional basis.

BOARD OF DIRECTORS

The Board of Directors of the combined entity will consist of four members of the current and nominated CERF Board of Directors and three members of the current Winalta Board of Directors who will be nominated for election at the upcoming special meeting of holders of shares of CERF. The Board of Directors of the pro forma CERF are expected to include Bill Guinan, David Maplethorpe, Wayne Wadley and Ken Stephens from the current CERF Board of Directors, and Blair Goertzen, Brad Munro and Alf Sailer from the current Winalta Board of Directors.

FINANCIAL ADVISOR

AltaCorp Capital Inc. is acting as financial advisor to the Board of Directors of Winalta and has provided the Board of Directors of Winalta with a verbal opinion that, subject to the review of final documentation, the consideration to be received by the holders of Winalta common shares pursuant to the Arrangement is fair, from a financial point of view, to the holders of Winalta common shares.

OTHER TERMS OF THE COMBINATION

The Agreement contains customary terms and conditions for a transaction of this nature, including: representations and warranties of CERF and Winalta and covenants applicable to each such entity until closing of the Combination regarding their respective businesses and affairs; a prohibition upon both CERF and Winalta from soliciting or initiating any discussion concerning any other business combination or similar transaction prior to the completion or termination of the Combination; the right of CERF and Winalta to match any unsolicited superior proposal received by the other party; and a reciprocal termination fee of $1 million payable to either Winalta or CERF, as the case may be, in certain circumstances.

Complete details of the terms of the Combination are set out in the Agreement, which will be filed by each of CERF and Winalta on SEDAR and will be available for viewing under each of CERF and Winalta's profiles at www.sedar.com.

ABOUT CERF

CERF Incorporated is a Canadian public corporation engaged in the rental, sale and service of industrial and construction equipment and waste management and environmental services. The Equipment Rental Segment includes the rental of residential, commercial and industrial construction-related equipment, including sales and service of equipment. It also includes the rental and sale of equipment to the drilling and service sectors of the oil and natural gas industry. The Waste Management Segment consists of complete waste facility management (six landfill sites in central Alberta) including waste facility design and construction services, recycling management and collection services, and consulting services. The Waste Management Segment also consists of waste removal and disposal from commercial, industrial and residential customers. CERF Incorporated trades on the TSXV under the symbol "CFL".

ABOUT WINALTA

Winalta specializes in the rental of innovative and high-quality modular buildings for the western Canadian oil and gas industry. Winalta's rental fleet is comprised of single-unit wellsites, integrated wellsite systems (IWS), dedicated geo labs, and drill camps. Winalta Inc. trades on the TSXV under the symbol "WTA".

Cautionary Note Regarding Forward-Looking Information

This news release contains certain "forward-looking information" within the meaning of Canadian securities laws, which may include, but is not limited to, statements with respect to future events or future performance, the timing and prospects for shareholder approval of the Combination, the implementation of the Combination, the integration of CERF and Winalta following the Combination (including synergies), the management team of the combined entity, results for business lines and critical mass, access to capital and liquidity, ability to capitalize on acquisition and growth opportunities, and integration of the two entities and anticipated operating efficiencies.

These statements reflect the current views of CERF and Winalta with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by CERF and Winalta, are inherently subject to significant business, economic, political and social uncertainties and contingencies. Many factors, both known and unknown, could cause the resulting entity's actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements contained in this news release, and CERF and Winalta have made assumptions based on or related to many of these factors. Such factors include, without limitation: fluctuations in the level of oil and natural gas exploration and development activities; fluctuations in the demand for well servicing and ancillary oilfield services; capital market liquidity available to fund customer programs; uncertainties associated with partner plans and approvals; the effects of seasonal and weather conditions on operations and facilities; the existence of competitive operating risks inherent in well servicing and ancillary oilfield services; general economic, market or business conditions; changes in laws or regulations; the availability of qualified personnel, management or other key inputs; currency exchange and interest rate fluctuations ; uncertainty of government policy changes; uncertainties associated with credit facilities and counterparty credit risk; changes in income tax laws or changes in tax laws; risks related to the operating nature of the resulting entity's business; political or economic developments in Canada; employee relations; litigation; and other unforeseen conditions which could impact the use of equipment and services supplied by the resulting entity. Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the forward-looking information and statements will occur. Additional information regarding some of these risks, expectations or assumptions and other factors may be found under in the Annual Information Form for the year ended December 31, 2013 of each of CERF and Winalta.

Although CERF and Winalta have attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be anticipated, estimated, described or intended. There can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, prospective investors should not place undue reliance on forward-looking information. The forward-looking information contained in this news release is made as of the date hereof and each of CERF and Winalta undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Certain information set out herein may be considered as "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding CERF and Winalta's reasonable expectations as to the anticipated results of the proposed business activities for the resulting entity for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.

Non-IFRS Measures

This news release includes references to financial measures commonly used in the oil and natural gas services industry. The term "EBITDA" (net earnings from continuing operations before interest and finance costs, income taxes, depreciation and amortization) does not have any standardized meaning under International Financial Reporting Standards (IFRS),, and may not be comparable with similar measures presented by other companies, however Winalta calculated EBITDA consistently from period to period. While EBITDA is not considered an alternative to net earnings in measuring performance, it is a key measure used by the Winalta and its investors. Winalta believes EBITDA assists investors in assessing Winalta's performance on a consistent basis without regard to financing costs, taxes and depreciation which, can vary significantly from period to period for reasons not directly related to operations.

This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities within the United States, nor shall there be any sale of the securities in which such offer, solicitation or sale would be unlawful. The securities of CERF to be offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act or other laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

FOR FURTHER INFORMATION PLEASE CONTACT:

OR

Contact Information:
CERF Incorporated
Wayne Wadley
President and CEO
(403) 850-4095
wwadley@cerfcorp.com


CERF Incorporated
Ken Stephens
Vice President Finance & CFO
(403) 281-1042
kstephens@cerfcorp.com


Winalta Inc.
Austin Fraser
President
(403) 826-5701
afraser@winaltainc.com


Winalta Inc.
David Hopley
CFO
(780) 469-0143
dhopley@winaltainc.com

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