On December 5, 2022, an initial draft of the Merger Agreement was uploaded by Ranger to the virtual data room for participants’ review and comment. The draft Merger Agreement included a note that the final structure of the potential transaction, as well as certain of the deal protection provisions, may be subject to change based on the identity of the potential buyer, the form, nature and mix of consideration being offered by such potential buyer and other factors as determined by the Ranger board.
Also on December 5, 2022, Ranger formally engaged K&E to act as its outside legal counsel in connection with Ranger’s consideration of a potential sale.
On December 7, 2022, the Baytex board held a meeting. At this meeting, Baytex’s senior management discussed with the Baytex board various merger, acquisition and divestment opportunities and their merits and provided a presentation to the Baytex board regarding a potential transaction with Ranger. The Baytex board authorized management to continue their evaluation of Ranger and following the meeting, Baytex began working with McDaniel & Associates Consultants Ltd. (“McDaniel & Associates”) to independently assess the Ranger reserves in accordance with NI 51-101.
Throughout December 2022, BofA Securities sent daily updates to Ranger’s senior management summarizing each process participant’s engagement, as indicated by due diligence questions asked, interaction with Ranger’s confidential information in the virtual data room, and whether the process participant had requested a telephone call to discuss the financial model. By December 12, 2022, the active process participants consisted of Baytex and Party A, Party B, Party D and Party J.
On December 6, 2022, Ranger began discussions with Wells Fargo Securities, LLC (“Wells Fargo”) in connection with a potential sale of Ranger, and Ranger formally engaged Wells Fargo for such purposes on February 8, 2023. Wells Fargo provided Ranger with analyses of potential acquirors of Ranger, including the selected potential counterparties’ financial strength and the advantages and considerations of pursuing a combination with such parties.
In advance of the December 15, 2022 deadline date for submission of indications of interest, management of Baytex, with the support of CIBC Capital Markets, continued its due diligence review in regards to a possible transaction with Ranger. As part of this due diligence review, over the course of several meetings and discussions, CIBC Capital Markets provided Baytex management with a detailed review of the strategic benefits and considerations for a transaction with Ranger, including an assessment of financial performance, asset quality and strategic fit. Following completion of such due diligence review, management of Baytex, with the assistance of CIBC Capital Markets, drafted a non-binding proposal, which outlined the principal business terms under which Baytex was interested in proceeding with further due diligence, analysis and negotiations with respect to a possible transaction with Ranger.
On December 14, 2022, the Baytex board held a meeting at which senior management made a presentation to the Baytex board regarding a potential transaction with Ranger and its intention to submit a non-binding proposal for an all-share transaction (the “Initial Baytex Proposal”). Members of management left for a portion of the meeting so that an in camera session of the independent directors could be held to allow the independent directors to deliberate on the business of the meeting and any other matters in the absence of management.
On December 15, 2022, the previously expressed deadline for submission of indications of interest, Ranger received indications of interest from Baytex, Party A and Party B. The Initial Baytex Proposal provided for an all-stock transaction at an exchange ratio of 9.3 Baytex common shares for each share of Ranger common stock, which represented an approximate 10% premium to both the 5-day and 20-day volume weighted average prices of the Ranger Class A common stock and Baytex common shares. Each of Party A’s and Party B’s proposals specified an at-the-market transaction, with Party B’s consideration comprised of 30% cash and 70% of its common stock and Party A’s consideration based on the 7-day volume weighted average price of Ranger’s Class A common stock and comprised of a cash and stock mix allocated at the Ranger shareholder’s election, subject to a cash cap. Party D maintained that it was continuing to evaluate a potential transaction through December 15, 2022, but did not submit a proposal. At or prior to the previously expressed deadline for submission of indications of interest, Party J indicated to representatives of BofA Securities that such party was no longer interested in participating in the sale process.
On December 19, 2022, the Ranger board held a meeting at which members of Ranger’s senior management, BofA Securities and K&E were also present. The Ranger board was provided with, and during the meeting representatives of BofA Securities reviewed, among other things, updated information on the Ranger Class A common stock price, the market conditions facing Ranger and other relevant information, including a summary of the non-binding proposals submitted by Baytex, Party A and Party B, and BofA Securities’ analysis of the implied value of each proposal on a fully-diluted basis, price protection for the Ranger shareholders and transactability of each counterparty, including as to certainty of closing, anticipated regulatory approvals and outstanding legal and financial due diligence. The Ranger board discussed informing Baytex and Party B that they would need to increase their valuation in order to continue in the process and the advisability of ceasing negotiations with Party A because the offer implied a discount of 4.6% to the closing price of Ranger’s Class A common stock on December 15, 2022. Promptly following the meeting of the Ranger board, and consistent with the Ranger board’s instructions, representatives of BofA Securities informed Party A that it had been eliminated from the process and informed each of Baytex and Party B that it should consider increasing the consideration reflected in its proposal. Thereafter, Party B informed representatives of BofA Securities that it was declining to continue in the process as Party B was unwilling to increase its consideration.
Between December 19, 2022 and January 5, 2023, representatives of Baytex, including Mr. Eric Greager, Baytex’s President and Chief Executive Officer, CIBC Capital Markets, and BofA Securities convened via conference calls to discuss economic terms of a potential transaction that the Ranger board would be willing to transact on, including whether Baytex was amenable to paying a portion of the consideration in cash in order to provide immediate and certain value to Ranger’s shareholders.
On December 21, 2022, Baytex submitted an update to the Initial Baytex Proposal reflecting an implied exchange ratio of 10.5 Baytex common shares per share of Ranger common stock, with 80% of such consideration payable in Baytex common shares and the remaining 20% payable in cash. Based on the closing price of Baytex common shares on December 20, 2022, the proposed consideration outlined in Baytex’s proposal update represented 8.4 Baytex common shares for each share of Ranger Class A common stock and $8.72 in cash.
On December 27, 2022, Baytex and Ranger entered into a second confidentiality agreement on substantially similar terms as the November 18, 2022 confidentiality agreement, under which Baytex would be the disclosing party in order to facilitate Ranger’s review of Baytex’s confidential information in light of the expectation that Baytex would issue Baytex common shares as consideration in the potential transaction.
On January 5, 2023, Mr. Greager indicated to Mr. Geiser that the Baytex board may be willing to consider that a greater portion of the merger consideration be paid in cash.
The next day, on January 6, 2023, Messrs. Edward Geiser, Chairman of the Ranger board, and Darrin Henke, President, Chief Executive Officer and Director of Ranger, authorized BofA Securities to send, and BofA Securities so sent, on behalf of the Ranger board a counteroffer to Mr. Greager. The counteroffer specified an implied exchange ratio of 10.8 Baytex common shares per share of Ranger common stock, with 75% of such consideration payable in Baytex common shares and the remaining 25% payable in cash. Based on the closing price of Baytex common shares on January 5, 2023, the proposed merger consideration outlined in Ranger’s counteroffer represented 8.1 Baytex common shares for each share of Ranger common stock and $11.57 in cash. The counteroffer also specified a price protection mechanic in the form of a 10% collar on the stock component for the period of time between signing of the Merger Agreement and the closing of the Merger Transactions. Finally, the counteroffer included a requirement that the Baytex common shares be dual listed on the TSX and the NYSE prior to the closing of the Merger Transactions.
On January 11, 2023, Messrs. Greager and Geiser spoke by telephone to discuss the terms of the Merger Transactions. Mr. Greager noted that Baytex was already preparing to list its common shares on the NYSE and indicated that he would continue to discuss Ranger’s proposed terms with the Baytex board and, based on a preliminary review of Ranger’s counteroffer, the Baytex board would not accept the collar mechanism.
On January 13, 2023, Messrs. Greager and Geiser again spoke by telephone to discuss the terms of the Merger Transactions. Mr. Greager noted that, after deliberating with the Baytex board, Baytex’s proposal would be revised to reflect an implied exchange ratio of 10.7 Baytex common shares per share of Ranger common stock, with 21% of the consideration payable in cash. Mr. Greager stated that the Baytex board would not accept the collar mechanism.
On January 13, 2023, representatives of each of K&E, V&E, Burnet, Duckworth & Palmer LLP, (“BDP”) and Stikeman Elliott LLP (“Stikeman”) participated in a telephone call regarding legal and process issues for a U.S./Canada cross-border transaction. That same day, Baytex provided access to a virtual data room containing certain confidential information to facilitate Ranger’s and its advisors’ financial and legal due diligence review.
On January 23, 2023, Baytex submitted to Ranger a draft, non-binding letter of intent and term sheet, including, among other terms, 10.7 Baytex common shares per share of Ranger common stock, with a to-be-agreed portion paid in cash. The non-binding letter of intent also specified that execution of the Merger Agreement would not occur until each of Baytex and Ranger publicly released its financial results for the year ended December 31, 2022 and proposed mutual exclusivity through March 31, 2023 (the “January 23 offer”). In subsequent discussions, representatives of Baytex and CIBC Capital Markets supplemented the letter of intent by verbally indicating to Ranger and BofA Securities that the cash portion of the consideration was anticipated to be equal to 25%. Thereafter, Mr. Geiser conveyed Baytex’s proposal to the Ranger board and discussed a proposed response with certain members of the Ranger board early the following morning.
On January 25, 2023, Messrs. Greager and Geiser spoke via telephone. Mr. Geiser indicated that, subject to negotiation of the transaction terms proposed in the January 23 offer, Ranger would be willing to proceed towards a definitive transaction if the cash portion of the merger consideration were comprised of $14.00 in cash per share of Ranger common stock and if the number of directors on the Baytex board post-closing were increased to nine directors, of whom three directors would be members of the existing Ranger board. Mr. Geiser further specified that the Ranger board did not consider exclusivity to be appropriate at this time. Mr. Geiser indicated Ranger would memorialize the terms of the discussion in writing for Mr. Greager to share with the Baytex board. Mr. Greager then provided an update on the status of relisting the Baytex common shares for trading on the NYSE and stated the expectation that the Baytex common shares would begin trading the last full week of February.
On January 27, 2023, K&E delivered to V&E a revised draft of the Merger Agreement that was originally provided to all bidders on December 5, 2022, updated to reflect certain provisions applicable to Baytex. The revised draft Merger Agreement was otherwise generally consistent with the draft originally uploaded to the virtual data room.
Also on January 27, 2023, Mr. Geiser, on behalf of the Ranger board, returned comments to Baytex’s January 23 offer, including the revisions to the terms Messrs. Geiser and Greager discussed on January 25, 2023. Mr. Geiser also communicated that Ranger would be willing to enter into exclusivity with Baytex for a limited period of 14 days following Baytex’s delivery of a revised draft of the Merger Agreement and of a list of Baytex’s proposed material terms with respect to a shareholders’ agreement and registration rights agreement.
On February 2, 2023, V&E delivered to K&E a revised draft of the Merger Agreement and a draft of the non-binding Investor and Registration Rights Agreement term sheet (“IRRA term sheet”). The draft Merger Agreement included, among other terms, (i) a statement via footnote that the Support Agreement to be delivered by the Class B Holders must be delivered within 24 hours of execution of the Merger Agreement and would not have a fall away provision in the event that the Ranger board changed its recommendation with respect to the Merger Transactions; (ii) that each party be obligated to convene their respective shareholder meetings at the same time; (iii) that neither party could terminate the Merger Agreement in order to enter into a superior proposal and, accordingly, that each party would have to hold a shareholder meeting notwithstanding a change of recommendation by the Baytex board or the Ranger board and (iv) a condition in favor of Baytex that there shall have been no material change to the anticipated tax treatment of the Merger Transactions. Further, the IRRA term sheet specified, among other terms, that one appointee to the Baytex board be mutually agreed between the parties, that the Class B Holders be subject to certain transfer restrictions for up to 18 months and other prohibitions that would limit the Class B Holders’ ability to dispose of their shares and that the Class B Holders be obligated to vote their Baytex common shares according to the recommendation of the Baytex board.
On February 7, 2023, Messrs. Geiser and Greager met via telephone. Mr. Greager stated to Mr. Geiser that the highest amount of cash consideration that the Baytex board would be willing to consider was $13.31 per share of Ranger common stock. Mr. Greager also stated that Baytex expected its shares to begin trading on the NYSE on February 23, 2023. Both Messrs. Greager and Geiser agreed to meet in person for reciprocal management presentations.
Also on February 7, 2023, Messrs. Geiser and Henke authorized BofA Securities to send, and BofA Securities so sent, on behalf of the Ranger board a counteroffer to Mr. Greager. The counteroffer specified an implied exchange ratio of 10.7 Baytex common shares per share of Ranger common stock, with 72% of such consideration payable in Baytex common shares and the remaining 28% payable in cash, and did not include a collar mechanism. Based on the closing price of Baytex common shares on February 6, 2023, the proposed consideration outlined in Ranger’s counteroffer represented 7.6 Baytex common shares for each share of Ranger common stock and $13.31 in cash.
On February 8, 2023, the Ranger board met via video conference with members of Ranger’s senior management and representatives of each of BofA Securities and K&E in attendance. At this meeting, among other things, representatives of K&E reviewed with the Ranger board its fiduciary duties, generally, and in the context of a potential sale of the company and the necessity for confidentiality in the process. Representatives of BofA Securities updated the Ranger board on the status of discussions since the Ranger board last met, including a summary of the sale process and the proposals that Ranger had received, as well as the discussions with representatives of Baytex in the interim. At this meeting, the Ranger board discussed the relative stock performance of Ranger relative to its peers and the relative implied exchange ratios of each of Baytex and Ranger over the last 12 months. Representatives of K&E reviewed the key terms of Baytex’s February 2, 2023 draft of the Merger Agreement and IRRA term sheet. The Ranger board discussed its strategy with respect to the Merger Transactions and determined that Ranger’s senior management should continue to advance its due diligence efforts on Baytex, update its management forecast for each of Ranger and Baytex to incorporate year end data points, and continue to update the Ranger board between meetings.
Also on February 8, 2023, K&E delivered to V&E a revised draft of the Merger Agreement and IRRA term sheet. The revised draft Merger Agreement, among other terms, (i) removed the statement that the Support Agreement to be delivered by the Class B Holders must be delivered within 24 hours of execution of the Merger Agreement and would not have a fall away provision in the event that the Ranger board changed its recommendation with respect to the Merger Transactions and provided instead that such Support Agreement must be delivered within 24 hours of the registration statement on Form F-4 being declared effective; (ii) included substantially reciprocal representations, warranties and interim operating covenants for both parties; (iii) included the obligation for Baytex to convene the Baytex special meeting as promptly as practicable even if prior to the registration statement on Form F-4 being declared effective by the SEC; (iv) specified that Baytex would only be able to engage in discussions and negotiations with respect to and ultimately recommend a superior proposal that did not require Baytex to abandon the Merger Transactions with Ranger and (v) removed the condition in favor of Baytex that there shall have been no material change to the anticipated tax treatment of the Merger Transactions. Further, the revised IRRA term sheet specified, among other terms, that two appointees to the Baytex board be mutually agreed between the parties, that the Class B Holders be permitted to dispose of their Baytex common shares at any time 90 days after the closing and rejected the concept that the Class B Holders be obligated to vote according to the recommendation of the Baytex board.
On February 13 and 14, 2023, members of Baytex senior management, members of Ranger senior management, BofA Securities and CIBC Capital Markets convened at the offices of K&E in Houston, Texas for reciprocal management presentations.
On the afternoon of February 14, 2023, Mr. Chad Lundberg, Baytex’s Chief Operating & Sustainability Officer, conducted field visits at Ranger’s operations.
On February 14, 2023, V&E delivered to K&E a revised draft of the Merger Agreement and IRRA term sheet. The revised draft Merger Agreement, among other terms, (i) included a statement via footnote
that the Support Agreement to be delivered by the Class B Holders must be delivered within 24 hours of execution of the Merger Agreement and would not have a fall away provision in the event that the Ranger board changed its recommendation with respect to the Merger Transactions; (ii) rejected that Baytex would only be able to engage in discussions and negotiations with respect to and ultimately recommend a superior proposal that did not require Baytex to abandon the Merger Transactions with Ranger and (iii) reinstated the condition in favor of Baytex that there shall have been no material change to the anticipated tax treatment of the Merger Transactions. Further, the IRRA term sheet specified, among other terms, that both appointees to the Baytex board be mutually agreed between the parties and independent and that the Class B Holders be subject to certain transfer restrictions for up to 12 months and other prohibitions that would limit the Class B Holder’s ability to dispose of their Baytex common shares.
On February 15, 2023, a special meeting of the Ranger board was held with members of Ranger’s senior management and representatives of each of BofA Securities and K&E. At this meeting, the Ranger board discussed the relative stock performance of Ranger against its peers and the relative implied exchange ratios of each of Baytex and Ranger over the last 12 months. Representatives of BofA Securities also discussed the state of the equity markets. Representatives of K&E reviewed with the Ranger board its fiduciary duties, including in the context of a potential sale of Ranger, and the necessity for confidentiality in the process and prompted the Ranger board to consider whether any undisclosed conflicts of interest existed. There being none, representatives of K&E then summarized the suite of deal protections in the Merger Agreement and the status of discussions with Baytex with respect thereto, including the timing of Baytex’s annual and special meeting, both Baytex’s and Ranger’s ability (or lack thereof) to consider alternative transactions before and after each of the times the Class B Holders deliver the Support Agreement and each party convenes its shareholder meeting for purposes of considering the Merger Transactions. The Ranger board determined that representatives of BofA Securities and K&E should continue to negotiate with Baytex and its advisors on the substantive terms of the Merger Agreement to narrow the issues raised in the recent revised drafts of the Merger Agreement.
On February 16, 2023, the Baytex board held a meeting to review the potential transaction with Ranger and received an update as to the current status of due diligence and negotiations. In addition, the Baytex board formally approved the retention of CIBC Capital Markets and RBC as financial advisors with respect to the Merger Transactions. At that meeting, among other things, management provided the Baytex board with detailed financial analysis and advice in respect of the terms of the proposed transaction and reviewed a presentation provided by CIBC Capital Markets with respect to same. Members of management left for a portion of the meeting so that an in camera session of the independent directors could be held to allow the independent directors to deliberate on the business of the meeting and any other matters in the absence of management. After due consideration of a number of strategic, financial, operational and other factors, the Baytex board authorized management to continue discussions with Ranger regarding the possible terms of a Merger Agreement.
On February 17, 2023, representatives of each of Ranger, Baytex, BofA Securities and CIBC Capital Markets convened via conference call to discuss the status of the potential Merger Transactions, including outstanding commercial and financial due diligence.
On February 18, 2023, Ms. Katherine Ryan, Vice President, Chief Legal Counsel and Corporate Secretary of Ranger, Mr. James Maclean, Vice President, General Counsel and Corporate Secretary of Baytex, and representatives of each of K&E, V&E, Stikeman and BDP participated in a telephone conference to discuss the possible timing of the Baytex annual and special meeting, the disclosures required by applicable law in the management information circular, and the expected timing and availability of the material financial and operational disclosures that would be included in the management information circular. That same day, Messrs. Henke and Greager met via telephone to discuss Ranger employee retention, including compensation, retention incentives, and severance matters.
On February 19, 2023, K&E sent V&E a revised draft of the Merger Agreement and IRRA term sheet. The revised draft Merger Agreement, among other terms, (i) included the affirmative obligation for Baytex to convene the Baytex annual and special meeting as promptly as practicable; (ii) specified that Baytex would only be able to engage in discussions and negotiations with respect to and ultimately recommend a superior proposal that did not require Baytex to abandon the Merger Transactions with Ranger and (iii) removed the condition in favor of Baytex that there shall have been no material change to the anticipated tax treatment of the Merger Transactions. The transmittal also included an initial draft of Ranger’s disclosure letter to the Merger Agreement.
On February 20, 2023, representatives of each of Ranger’s and Baytex’s senior management, together with their respective reserves auditors and financial advisors, attended via teleconference a commercial due diligence call in which each of Ranger and Baytex had the opportunity to ask and answer commercial due diligence requests.
On February 22, 2023, Ms. Ryan, Mr. Maclean and representatives of K&E participated in a telephone conference to supplement the legal due diligence efforts conducted to date via written materials provided by Baytex in its internally hosted virtual data room. In addition, Baytex was provided with a draft of Ranger’s 2022 Form 10-K that afternoon.
The morning of February 23, 2023, Baytex common shares began trading on the NYSE under the symbol “BTE”. That same day, the Baytex board held a meeting to review the proposed Merger Transactions, with representatives from each of CIBC Capital Markets, RBC, BDP and V&E in attendance. At the meeting, among other things, CIBC Capital Markets provided an analysis of an acquisition of Ranger as well as a discussion of key terms of the Merger Agreement, market conditions, commodity price outlook, the performance of each of Baytex and Ranger relative to their respective peers, metrics from similar acquisition transactions, strategic rationale for the proposed transaction and related considerations, trading metrics of peers of Baytex and Ranger, financial and operational forecasts of each company and as a combined company that were prepared by the Baytex management team, and a detailed value and transaction analysis of the proposed transaction having regard to various metrics and considerations. RBC reviewed a presentation with the Baytex board on the proposed Merger Transactions, including the expected market reaction, the potential introduction of a dividend, how to address the share position held by the Class B Holders post-closing and how the Merger Transactions would compare to recent similar transactions. V&E reviewed the key terms of the Merger Agreement, IRRA and Support Agreement with the Baytex board. BDP reviewed the directors’ fiduciary duties with respect to the proposed Merger Transactions and the process undertaken to date. BDP further reviewed the deal protection provisions included in the Merger Agreement including those being sought by Ranger.
Also on February 23, 2023, Messrs. Geiser, Henke, Greager and Mark R. Bly, Chair of the Baytex board, met via videoconference to discuss the terms proposed in K&E’s February 19 draft of the Merger Agreement, including perceived deal certainty to each of Baytex and Ranger, the Support Agreement, the composition of the Baytex board following the closing of the Merger Transactions, and Baytex’s ongoing tax analysis with regard to the structure of the proposed Merger Transactions. That same day, Mr. Greager, on behalf of the Baytex board, called Mr. Geiser to convey a further revised offer on behalf of the Baytex board. The revised offer specified an implied exchange ratio of 10.6 Baytex common shares per share of Ranger common stock, with 70% of such consideration payable in Baytex common shares and the remaining 30% payable in cash. Based on the closing price of Baytex common shares on February 24, 2023, the proposed consideration outlined in Baytex’s revised offer represented 7.49 Baytex common shares for each share of Ranger common stock and $13.31 in cash.
On February 24, 2023, V&E sent K&E a revised draft of the Merger Agreement and an initial draft of the IRRA. The revised draft Merger Agreement, among other terms, (i) included the affirmation via footnote that the Support Agreement to be delivered by the Class B Holders must be delivered within 24 hours of execution of the Merger Agreement and would not have a fall away provision in the event that the Ranger Board changed its recommendation with respect to the Merger Transactions; (ii) included the obligation for Baytex to convene the Baytex annual and special meeting no later than the 45th day following the date the registration statement on Form F-4 is filed with the SEC; (iii) set the Ranger termination fee at $60 million and Baytex termination fee at $90 million; and (iv) included the provision that Baytex would only be able to engage in discussions and negotiations with respect to and ultimately recommend a superior proposal that did not require Baytex to abandon the Merger Transactions with Ranger. On the morning of February 25, 2023, the Ranger board called a special meeting via video conference, with members of Ranger’s senior management and representatives of each of BofA Securities and K&E in attendance. A representative of K&E provided the Ranger board with a summary of the transaction documents, including a summary of the material changes to the Merger Agreement since the meeting of the Ranger board on February 15, 2023.
At the request of the Ranger board, BofA Securities reviewed its preliminary financial analysis, including that the proposed implied exchange ratio of 10.6x (comprised of $13.31 in cash and 7.49 Baytex common shares in exchange for one share of Ranger common stock) would result in present value greater than Ranger’s stand-alone discounted cash flow, both with and without taking into account synergies, and the analysis of the pro forma combined company.
Also on February 25, 2023, K&E sent V&E an initial draft of the Support Agreement. The draft Support Agreement included, among other terms, the obligation of the Class B Holders to vote in favor of the company merger and prior to the merger effective time, complete the Opco Unit Exchange. Further, the Support Agreement would terminate upon Baytex’s failure to hold the Baytex annual and special meeting for the purpose of obtaining the Baytex shareholder approval no later than the 45th day following the date the Form F-4 is initially filed with the SEC.
On February 25, 2023, K&E also sent V&E a revised draft of the Merger Agreement. The revised draft Merger Agreement, among other terms, (i) included that the Support Agreement to be delivered by the Class B Holders must be delivered within 24 hours of execution of the Merger Agreement; (ii) included the obligation of Baytex to convene the Baytex annual and special meeting no later than the 45th day following the date the registration statement on Form F-4 is filed with the SEC; and (iii) set the parent termination fee at $100 million and included the company termination fee at $60 million.
On February 26, 2023, Messrs. Geiser and Greager spoke via telephone. Mr. Geiser indicated, on behalf of the Ranger board, that the deal protection provisions reflected in the February 24 draft Merger Agreement and February 25 draft Support Agreement were generally acceptable. With respect to the IRRA, Mr. Geiser also communicated that the two appointees to the Baytex board would be mutually agreed between the parties and not affiliated with the Class B Holders and that the Class B Holders could not be obligated to vote in favor of a change of control transaction in respect of Baytex. Mr. Greager indicated he understood the position of the Class B Holders and would discuss with the Baytex board to facilitate finalizing the draft IRRA.
Later that day, the Baytex board held a meeting to review and consider the Merger Transactions on the basis of 7.49 Baytex common shares and $13.31 in cash, without interest for each share of Ranger common stock. Following deliberations, the Baytex board approved the Merger Transactions subject to finalization of the transaction documents in form satisfactory to Baytex and delegated to Messrs. Bly and Greager on behalf of Baytex, the authority to negotiate and, if appropriate, agree to the final terms of the transaction documents with the assistance of legal counsel.
Over the course of February 26, representatives of each of Ranger and Baytex senior management, V&E, K&E, Stikeman, and BDP finalized the Merger Agreement, disclosure schedules and ancillary documents, including the IRRA and Support Agreement.
On the evening of February 26, 2023, the Ranger board held a special meeting by videoconference at which members of Ranger’s senior management, BofA Securities and K&E were also present. Mr. Geiser noted for the Ranger board that Mr. Greager called him to note that the Baytex board was conditionally prepared to move forward with the proposed Merger Transactions between Ranger and Baytex, subject to finalization of all documents in a form satisfactory to Baytex, with authority delegated to Messrs. Bly and Greager, in consultation with Baytex’s legal counsel, to finalize the transaction documents. Because V&E and K&E were continuing to finalize drafts of the transaction documents, the Ranger board determined to adjourn until such time that the terms of the transaction documents could be confirmed to the Ranger board.
Following the above-mentioned board meeting, V&E sent K&E revised drafts of each of the Merger Agreement and the Support Agreement. K&E sent V&E revised drafts of each of the IRRA and the Baytex Disclosure Letter. The revised draft of the Merger Agreement, among other terms, included a Baytex termination fee of $95 million, and the revised draft of the Support Agreement, among other terms, would terminate if, due to a material breach by Baytex of its obligations under the Merger Agreement, Baytex did not hold the Baytex annual and special meeting to obtain the Baytex shareholder approval no later than the 60th day following the date the registration statement on Form F-4 is initially filed with the SEC.
On the evening of February 26, 2023, the Ranger board again held a special meeting by videoconference at which members of Ranger’s senior management, BofA Securities and K&E were also present.
Representatives of BofA Securities and K&E provided the Ranger board with a status update on the transaction documents, including that both the Merger Agreement and Support Agreement would be returned to V&E that evening, and the Ranger board agreed to reconvene on February 27 to approve the Merger Transactions upon final resolution of any outstanding issues on such documents.
On February 27, 2023, K&E sent revised drafts of the Merger Agreement and IRRA to V&E. In addition, representatives of senior management of each of Ranger and Baytex, and their respective legal advisors met to discuss the terms proposed in the draft Merger Agreement and Support Agreement circulated by K&E on February 26 and 27, 2023. The parties discussed, among other terms, that the obligations under the Support Agreement would fall away only under specified circumstances described in the section entitled “— The Support Agreement;” and the fact that two appointees could not be named and determined to be independent prior to execution of the Merger Agreement.
On February 27, 2023, the Ranger board held a special meeting via video conference with members of Ranger’s senior management and representatives of each of BofA Securities and K&E in attendance. A representative of K&E provided the Ranger Board with a summary of the transaction documents, including a summary of the material changes to such transaction documents since the meeting of the Ranger board on February 26, 2023, including as discussed on the call earlier that day. With respect to the Support Agreement, K&E noted that the obligations of the Class B Holders’ thereunder would fall away if: (i) Baytex fails to convene the Baytex annual and special meeting by the 60th day following the date the Form F-4 is initially filed with the SEC, (ii) there is a change in recommendation by the Ranger Board and (iii) the Baytex shareholders have not yet approved the Merger Transactions. Also at this meeting, BofA Securities reviewed with the Ranger board its financial analysis of the merger consideration and delivered to the Ranger board an oral opinion, which was confirmed by delivery of a written opinion dated February 27, 2023, to the effect that, as of that date and based upon and subject to the various assumptions and limitations described in its opinion, the merger consideration to be received by Ranger shareholders was fair, from a financial point of view, to such holders. After further discussion and consideration of the factors described under the section of this proxy statement captioned “— Recommendation of the Board and Reasons for the Company Merger” by the Ranger board, the Ranger board unanimously (i) determined that the Merger Agreement and the Merger Transactions are fair to, and in the best interests of, Ranger, and the Ranger shareholders, (ii) adopted and declared advisable the Merger Agreement and the Merger Transactions, including the company merger, (iii) directed that the approval of the Ranger Merger Proposal be submitted to a vote of the Ranger shareholders at the Ranger special meeting and (iv) resolved to recommend that the Ranger shareholders approve the Merger Agreement and the Merger Transactions, including the company merger, at the Ranger special meeting.
On February 27, 2023, Mr. Maclean communicated regularly with Mr. Bly and Mr. Greager regarding changes to the Merger Agreement, Support Agreement and IRRA since such drafts had been presented to the Baytex board on February 26, 2023 as such changes were being settled. Following the approval by the Ranger board of the Merger Agreement, on the evening of February 27, 2023, Messrs. Bly and Greager, following consultation with legal counsel, confirmed that such documents were now in a form satisfactory to Baytex.
On the evening of February 27, 2023, the parties executed the Merger Agreement and the IRRA. Concurrently with the execution of the Merger Agreement, Baytex delivered executed debt financing documents providing for its committed debt financing. Later that same day, the Class B Holders executed and delivered the Support Agreement. Each of Baytex and Ranger issued a news release announcing the Merger Transactions prior to the open of markets on February 28, 2023."