Calgary-based Petroamerica is acquiring Suroco Energy in an all-stock deal.Chris Bolin/The Globe and Mail
Merger and acquisition activity continues to intensify this summer, and Suroco Energy is a perfect example.
Over the past several weeks, two junior Calgary-based energy companies have stoked a proxy feud as Suroco Energy, a Colombia-focused oil and gas company, faces a bidding war for control of its shares. Suroco shareholders are now being urged to reject an acquisition offer from Petroamerica Oil Corp., defying the wishes of Suroco's board of directors.
In April, Suroco and Petroamerica signed an arrangement through which Petroamerica would acquire all issued and outstanding shares of Suroco at $0.80 per common share, to be taken up in cash, common shares of Petroamerica, or a combination of the two.
The deal was expected to be finalized in June, but was thwarted by what Petroamerica later called a "desperate" move from Vetra Ltd, a Colombian energy firm. Vetra swooped in with a hostile takeover bid, initially offering a "compelling and superior" $0.60 in cash per share, but later sweetening the deal all the way up to $0.83 per common share on June 24, all in cash.
On Thursday, proxy advisory firm Institutional Shareholder Services Inc. (ISS), switched sides and now recommends that Suroco shareholders vote against the Petroamerica offer at Suroco's upcoming shareholders meeting on July 14. Rather, ISS recommends that Suroco shareholders choose Vetra's offer.
"The newly revised Vetra offer of $0.83 in cash per share represents a higher value for shareholders," said ISS in a report Thursday. Based on market prices as of July 2, the Petroamerica offer would be an implied offer of about $0.80 per share, according to ISS analysis, which is lower than Vetra's offer.
On June 9, ISS had recommended that shareholders vote in favour of the Petroamerica arrangement. Meanwhile, Suroco's Board of Directors have rejected Vetra's offers, calling the bids "low-ball prices."
Regardless, Suroco shares have popped from $0.55 per share to $0.82 per share over the past month. This flurry of demand begs the question: what is so special about Suroco?
The fast answer is location. Both Suroco and Petroamerica have focused their efforts on Colombian oil properties, and Petroamerica aims to triple its production after acquiring Suroco, which would give it access to the oil-rich Putumayo Basin in Colombia, according to Bloomberg.
Vetra Ltd. is a subsidiary of Vetra Holding, which holds significant or majority interests in three out of five of Suroco's properties in Colombia, according to a press release from Suroco.