Texas investor Wilks Brothers LLC announced Tuesday evening it plans to launch a hostile takeover bid for Calfrac Well Services Ltd., ratcheting up the battle over one of Canada’s best-known oilfield service companies.
On Monday, Wilks lost a U.S. court bid to stop Calfrac from gaining bankruptcy protection, and the next day lost a separate attempt to litigate against Calfrac’s planned recapitalization. The struggle between the two companies continues to ramp up as Calfrac shareholders and note holders prepare to vote on a board plan to restructure the company’s finances to try to save it from insolvency.
Wilks said Tuesday it will offer 18 Canadian cents per share for the Calfrac shares it does not already own, a 3-cent premium over Tuesday’s closing price. The $26.13-million deal would give Wilks control of its Canadian competitor.
Matt Wilks, vice-president of investments with Wilks Brothers, told The Globe and Mail on Tuesday evening his company is launching the bid to give shareholders an alternative path to fiscal recovery if they vote against the board’s proposed restructuring on Sept. 17.
This is the second time Wilks has made a move to gain control of Calfrac.
When the Calfrac board floated its plan to avoid insolvency by swapping roughly $510-million worth of debt for equity as part of a court-supervised restructuring, Wilks proposed instead to buy up a large swath of the Calfrac debt it doesn’t already own, swap the debt for shares and pay the struggling company $80-million in cash. The swap and payment would have given Wilks a 60-per-cent equity stake in Calfrac.
A special committee struck by the Calfrac board gave the Wilks proposal a hard no, saying that only its own recapitalization plan would keep the company independent and give shareholders a fair deal.
Mr. Wilks told The Globe he believes the board is trying to “silence every opposition to what they want to do.”
He also rejected the idea a takeover would pit Calfrac against Wilks-owned ProFrac — the Canadian company’s direct competitor, of which Mr. Wilks is also the president and chief financial officer. While there are a few areas where the businesses overlap, he said, anti-trust laws in the U.S. and Canada – and separate board governance of the two companies – would prevent anti-competitive behaviour.
“We have continuously pushed to put a fair deal on the table here,” he said.
“We’re not the big, bad wolf.”
Wilks Brothers said in a press release the bid circular and related materials would be mailed to shareholders of Calfrac within the next 10 days.
In a Wednesday morning statement, Calfrac said its board would evaluate the Wilks takeover offer if an when it gets more official information and a formal offer. It advised shareholders not to take any action until then.
In the meantime, the Calfrac board urged stakeholders to vote in favour of the recapitalization plan on Sept. 17.
Also on Tuesday, Calfrac said a U.S. court ruling to recognize its recapitalization proceedings in Alberta court was a win for the Calgary-based company, and would help stop Wilks’s efforts to obstruct the recapitalization plan.
The Canadian company’s other legal victory came Tuesday, when Alberta’s Court of Appeal rejected a Wilks application to hear why the court should lift an order that stops the sale of Calfrac’s assets as it undergoes a restructure.
Calfrac has called Wilks Brothers a “wolf in sheep’s clothing” whose real goal is a corporate takeover.
With a report from Reuters, The Canadian Press
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Emma Graney