Chinook Energy Inc., a Calgary-based public oil and natural gas exploration and development company, has announced that it has signed a definitive arrangement agreement. Following the latest deal, Tourmaline Oil Corp., the Buyer, has decided to acquire all the remaining stock of Chinook using cash payment at $0.0675 per share. In other words, the company seeks to due shares for cash consideration. Well, the share consideration signifies a 33% premium above the twenty-day volume-weighted standard sales price of the Chinook Shares on the Buyer. The companies aim to complete the intended Transaction through a settlement plan under the Business Corporation Act (Alberta).
Last year, in November, Chinook started a tactical review process sustained by the management. At the time, a Special Committee comprising the board of directors of Chinook have had directed the procedure. Even more, Peters & Co. Limited, their financial adviser, have had reviewed different alternatives to boost the shareholder value. The publicly advertised process also followed reviews considered in previous years, mainly 2016 and 2018. The procedure was against the backdrop of persistent fragility in raw material costs, common Canadian E&P industry, and financial market conditions. Apart from this, it included the company’s existing half-yearly review of its required credit facility concerned with extending shareholder value in an extremely challenging environment.
Later, the wide-ranging assessment resulted in the valuation of various strategic alternatives. The choices included procurement of all or measurable segment of a Chinook’s resources and enterprise transaction opportunities. After thoroughly reviewing each of the choices, the board and management team of Chinook opted for Transaction. As per the team, Transaction signifies the best way for Chinook stakeholders along with a counterparty of substantial economic strength. Now, Chinook’s all of the executive officers, executives, and a key shareholder have agreed on a support agreement. Even more, they have settled to vote a total of around 37% of the unsettled Chinook Shares favoring the deal. The Transaction provides an opportunity for cash consideration and liquidity events to all stakeholders. After the closure of the Transaction, the Chinook Shares will be off from the list of TSX.
The deal is a matter of various closure terms, including bill of Court agreement and approval from Chinook shareholder. The Arrangement Agreement comprises of customary depictions and guarantees of every party and short-term operational agreements by Chinook. Besides this, the Arrangement Agreement offers for other things, like non-solicitation contracts, customary board support, subject to a liable to a fiduciary out for unwanted superior proposals concerning Chinook. It also includes providing for the authority to match any greater suggestion in the good turn of the Buyer.
Even more, the Arrangement Agreement offers for non-completion charges of $1.75 million. This type of fee is to be paid in case the Transaction remains incomplete, or Chinook terminates it in some circumstances. The condition is also applicable if Chinook signs a deal concerning a greater offer or if Chinook’s board modifies or withdraws its reference about the Transaction. It will require a yearly and special conference of Chinook stakeholders to consider other aspects of the Transaction. Even more, around 66% of the Chinook stakeholders have to cast their vote in favor of the Transaction for approval.
Meanwhile, Peters & Co. Limited has operated as a financial consultant to Chinook regarding the Transaction. The company has offered its verbal impartial opinion. Currently, further details of the Transaction are unavailable. The conference may take place by the end of April 2020.