Total Energy Services Inc.'s $225-million hostile takeover of Savanna Energy Services Corp. appeared near-assured last month, but shareholders are facing another prompt to make a choice this week as the Total offer winds down.
Total Energy is offering 0.13 of one of its shares, plus 20 cents in cash, for each Savanna share, and has more than 50 per cent of Savanna shares sewn up. But the goal is 100-per-cent share ownership and privatization of Savanna – which has struggled alongside other oil field services firms with the crude price drop and the resulting plunge in activity.
Late last month, it became clear Total Energy had beaten out a friendly and potentially richer stock swap deal from Western Energy Services Corp.
Savanna had fought Total Energy's hostile bid from the moment it first surfaced late last year but is now expressing a different tone.
In a news release Monday, it reminded investors that the offer expires Friday, and emphasized the uncertainty that comes with not tendering shares. Although Total Energy could extend the offer, or pursue a compulsory acquisition in its bid to get 100 per cent of shares, Savanna warned shareholders should be mindful that they could receive less if Total Energy proceeds to acquire outstanding shares by other means.
Shareholders "should be aware that any purchases of such Savanna shares by Total could be at a price less than the price to be paid for the Savanna Shares under the Total offer," the release said.
"Alternatively, Total may decide not to pursue completion of the privatization of Savanna and maintain its holdings of Savanna shares or sell or otherwise dispose of any or all the Savanna shares acquired pursuant to the Total offer. These transactions may be completed on terms and at prices then determined by Total, which may vary from the terms and the price paid for the Savanna shares under the Total offer."
Savanna also announced that Dwayne LaMontagne, who had been with Savanna for more than a decade, has resigned as executive vice-president and chief financial officer. Rick Torriero, the vice-president of finance, will serve as interim chief financial officer.
Major shareholders have been drawn to the Total Energy deal with its argument that Western Energy, like Savanna, is heavily indebted – "and a combination of Savanna and Western Energy will simply result in a larger entity with significant indebtedness, limited financial flexibility and a high cost of capital."
Total Energy has argued its strong balance sheet provides Savanna shareholders financial resilience, and upside, in a time of continuing oil-price-driven turmoil for the oil field services sector.
In an interview on Tuesday, Total Energy chief executive Dan Halyk would not comment on future actions following expiry of the offer on Friday, but said the options available to shareholders are now a lot clearer.
"The deal between Western and Savanna is dead. So that eliminates some distraction."
Mr. Halyk added that Total Energy has now been able to engage with the board of Savanna in a constructive manner. "My sense is that everyone realizes it's in Savanna shareholders' best interest for us to work together for a smooth transition."
Total Energy also expressed hope last month that Savanna's $200-million loan from Alberta's public-sector investment manager – Alberta Investment Management Corp. or AIMCo – will not stand in the way of the takeover.
This is despite the fact that Savanna had said last year that AIMCo did not intend to consent to a change of control.
However, AIMCo has refused any recent comment on the potential takeover.
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