Total SA's $1.5-billion acquisition of UTS Energy Corp. is being marketed as both a win for the French oil giant, which gets access to Alberta's Fort Hills oil sands mining project, and a triumph for UTS shareholders, who get $3.08 per share in cash, plus a proportional ownership of a new spinoff, SilverBirch Energy Corp.
The deal also lets SilverBirch's management team get their feet wet in the early development stages of other properties. This team's make up is still being worked out, but many of the players who grew UTS' market capitalization from $50-million in 2004 to over $1-billion this year are likely to be on board.
SilverBirch will start with about $50-million in seed capital, enough running room for 18 months to two years. In that time, William Roach, UTS' chief executive officer, hopes further big announcements will encourage equity investors to buy-in or lead to what he called "creative financing."
However, SilverBirch's investors will probably have to wait a few years before seeing any significant share price movement. Regulatory approval for procurement and construction of its 50 per cent working interests in the Frontier and Equinox leases isn't expected until 2014.
The UTS acquisition has been in the works for almost two years. The wheels were set in motion in September, 200,8 when the Fort Hills project costs were projected to sky rocket and UTS' share price fell below a buck. Mr. Roach said he fielded calls from a bunch of interested players, but it was Total who launched two unsuccessful hostile takeover bids. Throughout the process, Mr. Roach said he was never once mad at Total, but did disagree with the cash prices it offered.
It was this quest for cash that really pushed UTS down the acquisition route. The company has traded below intrinsic value for the past two years, and Mr. Roach thought a takeover was the best way to extract the cash he thought shareholders deserved.
Tim Kiladze