Employees of the Canadian Pacific Rubiales Petroleum Company stand next to oil excavation pipes at Campo Rubiales field in Meta, eastern Colombia, in this file photo.JOSE MIGUEL GOMEZ/Reuters
Pacific Rubiales Energy Corp. shares tumbled more than 45 per cent after its suitors abandoned a $2-billion takeover bid, leaving the South America-focused oil producer in limbo with warring factions controlling much of the stock.
Alfa SAB of Mexico and private-equity-backed Harbour Energy Ltd. had offered $6.50-a-share in cash for the debt-heavy company, but withdrew the proposal late Wednesday in the face of a groundswell of opposition among shareholders. They own about 19 per cent of the stock.
O'Hara Administration Co., whose principal is well-connected Venezuelan businessman Alejandro Betancourt Lopez, led a group of dissident investors in a proxy battle that appeared to have swayed enough shareholders to reject the offer. O'Hara and its allies, which control 19.8 per cent of the shares, complained that the bid undervalued Pacific Rubiales.
They did not float an alternative proposal, however.
The shares skidded $2.40 to $2.85 Thursday on the Toronto Stock Exchange.
It is not known what O'Hara's or Alfa and Harbour's next moves will be, though the spurned suitors were adamant that the last offer was final. Now, battling factions control nearly 40 per cent of the shares.
There was some market speculation on Thursday that changes to Pacific Rubiales's board of directors following the failed sale process could be in the offing.
As recently as early this week, some investors had wagered that O'Hara's public campaign to criticize both the offer and Pacific Rubiales's management could result in a higher bid, and the withdrawal appears to have dashed such hopes.
Pacific Rubiales declined to comment beyond saying that it will now resume initiatives to cut costs, sell assets, reduce debt and move forward with a joint venture in Mexico it had previously set up with Alfa.
The company has questioned the motives and past dealings of the O'Hara group and its allies, which had acquired the bulk of their holdings in the lead-up to the bid being announced. It has charged that O'Hara broke securities laws when it built up its position, which prompted an application with the British Columbia Supreme Court. The allegations have not been proven in court, though that action was tied to the shareholder vote for the takeover, which has been cancelled.
A spokesman for Pacific Rubiales would not comment on whether the company will launch further legal action.
With oil prices retreating to the low $50s (U.S.) a barrel, the company's renewed efforts to jettison non-core holdings could be tough, said Darren Engels, analyst at FirstEnergy Capital Corp. Pacific Rubiales managers had warned previously that, without the takeover, prospects would be constrained by the nearly $5-billion (Canadian) debt load.
"What will have to happen in due time, is that Pacific Rubiales will have to communicate a strategy to the market, for all shareholders," Mr. Engels said.
He reduced his target price to $3.75, with an "underperform" rating that reflects the impact of the debt burden.
Jeffrey Jones