In Oil & Companies News 22/05/2015
Alfa SAB’s oil ambitions are a step closer, with Pacific Rubiales Energy Corp. accepting its takeover offer in a deal that values Latin America’s largest non-state oil producer at about C$2.1 billion ($1.7 billion).
Pacific Rubiales agreed to the joint bid by Alfa, a Mexican conglomerate, and Harbour Energy Ltd. of C$6.50 cash for all Pacific Rubiales shares, the Colombian producer said Wednesday. That’s 39 percent more than the closing price on May 4, the day before it said it had entered exclusive talks. The stock rose to a four-month high of C$6.29 in Toronto Thursday.
The agreement comes a day after a group of investors led by Caracas-based Alejandro Betancourt said it may buy more Pacific Rubiales stock to block the Alfa-Harbour bid. Alfa, which already owns 19 percent of Pacific Rubiales, is seeking to expand in oil as its home nation opens production to foreign investment. Pacific Rubiales produces about 150,000 barrels a day mostly in Colombia and wants to bid for Mexican fields.
“You have to think that for Alfa to have gotten to this stage they will have at the very least sounded out the bigger institutional shareholders,” said Ian McCall, a money manager at Geneva-based Quesnell Capital. “If they were hearing from enough of the shareholders that are involved that C$6.50 is not going to fly I would expect you’d have seen an amended bid.”
The Alfa-Harbour offer price is 73 percent below Pacific Rubiales’s 2014 high, which was set before crude began to tumble. The Colombian company’s shares have fallen 68 percent over the past 12 months as the oil slump led to record losses.
July Vote
Pacific Rubiales expects to put the arrangement to a shareholder vote in early July and needs two-thirds of total votes and a simple majority of votes other than Alfa and its affiliates, according to the statement. Opting for a higher bid would trigger a $50 million fee for each of Alfa and Harbour.
The Venezuelan-led group under the banner of O’Hara and partners is already the biggest shareholder with a 19.5 percent stake. O’Hara is studying all options, including a counteroffer and forming an alliance with other holders to block the Alfa-Harbour bid, spokesman Orlando Alvarado said.
Alfa’s offer isn’t negotiable and the San Pedro Garza Garcia, Mexico-based company has had positive feedback from Pacific Rubiales’ bondholders, Chief Financial Officer Ramon Leal said in a telephone interview.
Alfa and Harbour — formed by Asian commodity trader Noble Group Ltd. and private-equity firm EIG Global Energy Partners LLC — will seek joint ownership of Pacific Rubiales and would de-list the shares, Leal said. Alfa won’t guarantee or absorb any debt, he said. The Colombian producer has at least $4.5 billion net debt, according to data compiled by Bloomberg.
“The only thing that would be reflected in Alfa’s balance sheet is investment in shares reflected as equity,” Leal said.
‘Real Interest’
Alfa has “shown real interest in the company and I don’t see the Venezuelans with a real interest beyond increasing their own returns,” Fernando Bolanos, an analyst at Monex Casa de Bolsa, said in an interview Thursday.
Conditions of the Alfa-Harbour deal include waiving a requirement for a change of control offer for senior unsecured notes and amending debt-to-Ebitda covenant tests to a net debt basis for three years, while increasing the ratio limit to 4.5 from 3.5.
Separately, holders of 5.375 percent notes due 2019 will be offered to exchange them for a new series of 7.25 percent notes due 2021. The 2019 bonds rose to 94.11 cents on the dollar from 91.83 cents Wednesday, pushing down the yield to 7.2 percent.
Fair Value
Bank of America Merrill Lynch is acting as financial adviser to Pacific Rubiales, while Norton Rose Fulbright Canada LLP is its legal adviser. GMP Securities LP, UBS Securities Canada Inc. and Osler, Hoskin & Harcourt LLP are advising an independent committee. Wildeboer Dellelce LLP is acting as legal adviser to management of the company.
A GMP valuation concluded that a fair market value of the common shares is in the range of C$3.13 to C$7, according to the Pacific Rubiales statement.
