Venezuelan investor fights $2-billion takeover of Pacific Rubiales

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A group of investors led by a well-connected Venezuelan businessman has amassed more shares in a bid to scuttle a friendly, $2-billion takeover of Pacific Rubiales Energy Corp. by another consortium.

Toronto-listed Pacific Rubiales, known for South American oil and gas operations that include Colombia's biggest oil field, has agreed to be acquired by Mexico's Alfa SAB and private-equity-backed Harbour Energy for $6.50 a share. The transaction would include the assumption of more than $5-billion (U.S.) of debt.

The bid represents a 39-per-cent premium to the price before the companies said they were in exclusive talks in early May, and more than 80 per cent above the 30-day average leading up to that. However, it is worth just a third of Pacific Rubiales's stock price a year ago.

A group led by Leopoldo Alejandro Betancourt Lopez opposes the deal, saying it undervalues the company. Mr. Betancourt is chief executive officer of Derwick Associates, a Venezuelan energy and engineering firm specializing in electric power plants.

He and his mostly South American allies said late Wednesday they had boosted their stake in Pacific Rubiales to 19.82 per cent in the latest in a series of stock buys. It is up from around 10 per cent acquired before the takeover was formally announced.

Mr. Betancourt said in a filing that he and his affiliates may increase their interest even more before a July investor meeting to vote on the deal, as well as communicate with other shareholders and solicit proxies.

The group, which includes 11 investors in total, has not proposed an alternative deal, but may consider such a move "if circumstances change."

A spokesman for Mr. Betancourt's group was not immediately available for comment.

The group's moves have given investors doubts the deal will close, as Pacific Rubiales shares are more than 10 per cent under the bid price.

For its part, the Alfa side owns nearly 19 per cent of Pacific Rubiales. A source close to the transaction said many investors appear to be supportive of the deal, especially given weakness in oil markets.

"The 81-per-cent all-cash offer, and the immediate certainty it provides, is resonating with shareholders," the source said.

The deal requires the approval of two-thirds of Pacific Rubiales shareholders. The takeover circular is expected to be mailed in the coming days.

Alfa and Harbour are each entitled to a $50-million (U.S.) break fee if Pacific Rubiales terminates the agreement.