Offer--are they serious?
Ensign to make $1.68-a-share hostile offer for Trinidad
2018-08-13 06:22 ET - News Release
See News Release (C-ESI) c
Mr. Bob Geddes of Ensign reports
ENSIGN ENERGY SERVICES INC. ANNOUNCES OFFER TO ACQUIRE TRINIDAD DRILLING LTD.
Ensign Energy Services Inc. intends to commence an offer to acquire, through a wholly owned subsidiary, all of the issued and outstanding common shares of Trinidad Drilling Ltd. for $1.68 in cash per common share. This represents approximately a 20% premium to the volume weighted average price of the common shares of Trinidad (on the TSX) for the trading days between August 1 through August 10, after Trinidad announced on August 1, 2018 the end of its strategic review process. Including Trinidad's estimated outstanding net debt of $477 million as at June 30, 2018, the total value of the transaction is approximately $947 million.
Following Trinidad's announcement on August 1, 2018 of the unsuccessful conclusion of its comprehensive public strategic review process, Ensign approached Trinidad's Board of Directors (the "Trinidad Board") with a proposal to enter into negotiations regarding a fully-funded all-cash transaction which would provide Trinidad shareholders the opportunity to realize an immediate premium and liquidity for the Trinidad Common Shares at a compelling value. After having advised the Trinidad Board of our Offer and willingness to negotiate a Trinidad Board-supported transaction, we believe the best course of action is to make the Offer directly to Trinidad shareholders.
REASONS TO ACCEPT THE OFFER
- We believe that our Offer is compelling, and represents a clearly superior alternative to continuing on the course set by the current Trinidad Board and management, for the following reasons:
- Premium to Market Price. The Offer price represents approximately a 20% premium to the volume weighted average price of the Common Shares of Trinidad (on the TSX) for the trading days between August 1 through August 10, after Trinidad announced on August 1, 2018 the end of its strategic review process.
- Full and Fair Value for Trinidad Shareholders. The Offer price of $1.68 per Common Share represents a premium value that fairly reflects the composition and performance of Trinidad's asset base. The Offer price represents an enterprise value of $947 million and we believe represents full and fair value for Trinidad shareholders.
- Certainty of Value and Immediate Liquidity. The standalone alternative of Trinidad is highly uncertain and relies on successful execution of key initiatives over a lengthy period of five years. Initiatives which we strongly believe should have already been part of Trinidad's corporate strategy versus being a "future plan". In particular, Trinidad's initiative #3 "culture of high performance and shareholder alignment" and initiative #1 "commitment to financial discipline and generating free cash flow" should be core corporate principles, not aspirational initiatives. Trinidad shareholders face a highly uncertain future and an unpredictable share price. The Offer provides 100% cash consideration for the Common Shares, giving Trinidad shareholders certainty of value and immediate liquidity.
- Let Shareholders Decide. In the wake of their failed strategic review process, Trinidad communicated that proposals were received and the Trinidad Board determined that the best alternative was to forgo any proposal, without consulting shareholders, and pursue their "future plan" over the next five years. We feel strongly that Trinidad shareholders should be offered the ability to choose the path forward for Trinidad.
- Fully Financed Cash Offer. The Offer is not subject to a financing condition. Ensign has secured, on a firm, committed basis, all of the financing required to fund the entire consideration payable for the Common Shares and, if required, to refinance existing Trinidad debt as well as Ensign debt that may be required to be refinanced as part of the transaction. A fully committed financing in connection with the Offer is being provided by BMO Capital Markets and will be funded with aggregate commitments, consisting of:
- $1.25 billion 3 year revolving credit facility;
- US$700 million bridge loan financing.
- The fully committed bridge loan financing is expected to be replaced with a high yield offering.
- High Likelihood of Completion. Ensign is a highly credible counterparty with a proven track record of closing significant acquisitions, including its US$510 million acquisition of the land drilling division of Rowan Companies, Inc. Moreover, Ensign does not anticipate the Offer to pose a material regulatory risk to complete.
- Extremely Low Likelihood of a Competing Offer. Ensign believes that Trinidad is highly unlikely to surface a competing offer at a premium to the price being offered by Ensign. Trinidad has just completed a comprehensive public strategic review process which did not result in any agreement to crystalize value for Trinidad shareholders. This failed strategic review process is a clear indication of lack of other viable alternatives for Trinidad shareholders to realize an immediate premium and liquidity.
- Destruction of Shareholder Value. Trinidad has failed to create meaningful shareholder value over the long-term as the current price of the Trinidad Common Shares is close to both the 52 week and all-time low share price. We strongly believe that our Offer is a far superior alternative to the risk of further value destruction as Trinidad seeks to implement its "future plan" over an elongated time period of five years.
SHAREHOLDERS - THE TIME FOR ACTION IS NOW
We are shareholders of Trinidad, as Ensign owns 26,863,239 Trinidad Common Shares, representing approximately 9.8% of its outstanding Common Shares. Following our approach to the Trinidad Board, the Trinidad Board offered to engage in discussions with us, however these discussions were to be subject to the terms of a confidentiality agreement which contained a lengthy standstill provision. We do not believe that such a provision is in the best interests of shareholders. We strongly believe that the Trinidad Board and management of Trinidad, as fiduciaries of the company, should have engaged with Ensign, without a standstill, to pursue an attractive opportunity to surface shareholder value.
The Trinidad Board's failure to fully engage with Ensign has led us to bring the Offer directly to you, the shareholders and true owners of the company. However, unless the Trinidad Board agrees to shorten the bid period to as little as 35 days, the Offer must remain open for at least 105 days. There is no practical reason for the Trinidad Board to keep the Offer outstanding for that long, precluding the Trinidad shareholders from realizing the premium and liquidity sooner. Trinidad has just concluded a strategic review process which did not uncover any viable opportunities. It is within the Trinidad Board's power to shorten the minimum bid period to 35 days and we urge Trinidad shareholders to contact members of the Trinidad Board to encourage them to do so.
The Offer
The Offer will be made for all of the issued and outstanding Common Shares of Trinidad. Full details of the Offer will be included in the formal offer and take-over bid circular, to be filed with securities regulators within the next two weeks. The take-over bid circular will be filed on SEDAR at www.sedar.com.
The Offer will be subject to customary conditions including, without limitation, the deposit under the Offer of Common Shares representing at least 66-2/3% of outstanding Common Shares, receipt of all necessary governmental, regulatory and third party approvals, waiver of the Trinidad shareholder rights plan, and no material adverse change having occurred in the business, affairs, prospects or assets of Trinidad. The Offer will not be subject to the approval of Ensign's shareholders and is not subject to any financing or due diligence conditions.
Under applicable Canadian securities laws, the Offer will initially be open for acceptance for a minimum of 105 days from the date of commencement, subject to the ability of the Trinidad Board to shorten the deposit period in certain circumstances, provided that the minimum deposit period can never be less than 35 days from the date of the Offer. The Offer is subject to a non-waivable condition that more than 50% of the outstanding Common Shares, excluding those Common Shares beneficially owned, or over which control or direction is exercised, by us or by any person acting jointly or in concert with the Offeror, shall have been validly deposited and not withdrawn. The Offer will be extended for a period of not less than 10 days after the Offeror first takes up shares under the Offer.
Advisors
Ensign has retained BMO Capital Markets as its exclusive financial advisor, Osler, Hoskin & Harcourt LLP as its legal counsel, and Kingsdale Advisors as its strategic communications advisor, information agent and depositary.
For additional information including assistance in depositing Trinidad shares to the Offer, Trinidad shareholders should contact the information agent for the Offer, Kingsdale Advisors at 1-866-581-1514 (North American Toll Free Number) or 1-416-867-2272 (outside North America), or by email at contactus@kingsdaleadvisors.com.
About Ensign
Ensign is a global leader in oilfield services, headquartered out of Calgary, Alberta, operating in Canada, the United States and internationally. We are one of the world's top land-based drilling and well servicing contractors serving crude oil, natural gas and geothermal operators. Our premium services include contract drilling, directional drilling, underbalanced and managed pressure drilling, rental equipment, well servicing and production services. Please visit our website at ensignenergy.com.
Ensign's Common Shares are publicly traded though the facilities of the Toronto Stock Exchange under the trading symbol ESI.
We seek Safe Harbor.
© 2018 Canjex Publishing Ltd. All rights reserved.