AOS is in toughThe AOS BOD is getting what they deserve. They can't win a 2/3 majority. And once all shareholders process the failed merger and its associated costs, they probably can't win a proxy fight either. As things stand, this deal is done and the AOS BOD is done. Their faint hope is to buy SW's support for the merger.
This fiasco is only the latest in an uninterrupted string of the current BOD's failures. The blew like drug addled teenagers over $8 million in Africa, with absolutely nothing to show for it. (Anyone interested in exploing what it would cost to hire consultants to determine into whose pockets that money found its way?) They "loaned" the buyers of Leduc, one of the conventional producing properties once held by AOS, over $1 million for required site mitigation and never got it back. The Algar Lake farm out agreement was cancelled because it turned out the other party had no money. They rolled over and accepted $35 million from the Alberta government in compensation for the Clearwater leases, despite tallying associated costs of over $50 million - with no explanation to shareholders. The withdrawn rights offering in 2012 cost $350 k - small change compared to other BOD screw ups, but still another example in an uninterrupted string of screw ups. And, as is now abundantly clear, they grossly miscalculated in their attempt to avoid a SH vote on the proposed merger with MQL. So, after a two-year "strategic review", we appear to be exactly where we started, though with considerably less money than when we started.
There are no mitigating circumstances: this BOD is utterly incompetent. If they have any honour, they will not stand for re-election at the next AGM. Regardless, they are done. If they do fight their ouster, SH will lose yet again. The last proxy fight cost AOS over $2.5 million.
So what's next?
AOS has 30 days from Sept 12 to hold a special meeting to vote on the proposed merger. Failure to do so - even though the result is a foregone conclusion - could trigger the $1.5 million break fee. (I don't believe an unsuccessful vote itself would trigger any damages - a rumour started by SW, by the way, and one which I initially thought to be true - but I'll leave that for others to bicker about.)
It appears SW will gain control. I don't believe SW is being entirely transparent. They have never mentioned AOS's bitumen leases, which during normal times have considerable value - particularly Grand Rapids, on which AOS has already spent $8 million in exploration. AOS got $24 million for Hangingstone in - a property which was further advanced in resource definition than any of the remaining leases. There appears to be growing belief that oil prices will return to more normal prices within a couple of years. There also appears to be increasing confidence that a Canadian pipeline to the tide water will be built, which would make the oilsands more viable than ever before. AOS's leases will be valuable again.
If a SW-led BOD proceeds with a cash distribution, shareholders must demand clear indication that they recognize the latent value of AOS's bitumen leases and measures to ensure that value is preserved on behalf of all SH.