National Post (National Edition)
Total Energy initiates hostile bid for indebted driller Savanna
CALGARY • Total Energy Services Inc. followed through on its threat of an unfriendly takeover for Savanna Energy Services
Corp. Friday, even as the target company is trying to close a debt restructuring deal with a pension fund manager owned by the government of Alberta.
Total, a Calgary-based oilfield service provider, took the unusual and widely criticized step of announcing its intention to launch a hostile bid for heavily indebted driller Savanna in November before formally launching its all-share offer worth $164 million plus debt on Friday.
The timing of the offer, however, now puts Savanna’s management and board in a difficult situation because the company is trying to raise money and restructure its debts in a deal announced Nov. 22. The Calgary-based company is raising almost $19 million through a share offering plus another $219 million worth of debt and equity from the Alberta Investment Management Corp., known as AIMCo.
Total president and CEO Daniel Halyk said it would be difficult for Savanna’s board to argue his offer, which amounts to $1.82 per share, isn’t fair when the target company is currently trying to close a money-raising deal at a value of $1.45 per share.
“Clearly, the board of Savanna believes $1.45 is a fair price, otherwise they wouldn’t agree to issue 31 per cent more stock at that price,” Halyk said in an interview. “They’ll have to answer that question of why $1.45 cash is good and $1.82 with upside is bad.”
Savanna president and CEO Chris Strong said he wanted to comment, but was unable to discuss any offer because the company is actively trying to raise money and its capital-raising deal is scheduled to close next week.
An earlier release from the company responding to Total’s announced intention to bid said Savanna’s board would “consider and evaluate Total’s offer, if and when received and will respond in due course.”
Savanna shares closed at $1.81, up 12 cents or 7.1 per cent Friday after Total took its all-share deal directly to the drilling company’s shareholders.
Halyk said his company already has the support of 44 per cent of the target’s shareholders thanks to three large institutional investors — Franklin Bissett Investment Management, Invesco Ltd. and Foyston Gordon & Payne Inc.
Total’s release said the allshare deal offers Savanna shareholders upside as drilling activity improves following a downturn in demand for oilfield services with less risk, as Total has limited debt.
Halyk said he is also looking to meet with AIMCo and other Savanna shareholders to make the case that Total could better manage Savanna’s assets.
The timing of Total’s offer, combined with the previously announced intention to launch a hostile bid, could also make it difficult for Savanna to implement defensive strategies, like a poison pill, to thwart the deal.
“Their board has had more than enough time. We gave them three weeks’ heads-up before we even made the bid so they’ll have, what, 135 days? So I would expect no poison pill,” Halyk said.
Total’s hostile bid for Savanna will be among the first takeover bids in Canada to operate under new securities administrators’ rules requiring acquirers to keep their offers open for a minimum of 105 days.
Total, which offers a range of oilfield services including rental equipment and drilling, unsuccessfully attempted a hostile takeover of another company, Strad Energy Services Ltd., in 2015.
Halyk said he expected the deal for Savanna would close given the support from institutional shareholders, one of which he said approached Total with the idea for a business combination.