Chinese investors buy debt-stressed energy company
An undisclosed group of Chinese investors will buy all of the oil and gas assets of the debt-saddled Long Run Exploration Ltd, based in Calgary, Alberta.
The company said on Monday that the investors had agreed to pay a 215 per cent premium, or 52 cents, to Long Run’s share price of 16 cents. The aggregate value of the transaction, including the assumption of Long Run’s current net debt and transaction costs, is approximately $770 million, the company said.
The stock more than doubled to 36 cents Monday on the Toronto Stock Exchange. Shares inched up to 37 cents on Wednesday.
Long Run said in a statement that “commodity prices and equity markets have continued to deteriorate. Long Run has remained focused on improving its balance sheet despite challenging market conditions while ensuring maximum optionality exists to create value for all stakeholders.”
The Chinese investors have extensive experience in operating and investing in the oil and gas sector and had “recently undertaken and completed significant controlling investments into the upstream oil and gas sector in Canada,” the company said in a statement.
Bill Andrew, Long Run chairman and CEO, said on Monday that the buyers want their identity withheld for now but they will be identified at a later date, the Calgary Herald reported. He said the Chinese investors already have large oil and gas investments in Canada and that although they refer to themselves as a group, they operate as a corporation.
Andrew said that Long Run’s 200 employees will keep their jobs in a private company that will have a similar business model: acquire, develop and grow oil and gas assets, the Herald reported.
The investors also are offering $750 per $1,000 principal amount to buy out Long Run’s holders of 6.4 per cent convertible unsecured subordinated debentures due on Jan 31, 2019.
On Monday, Long Run said it had agreed with Maple Marathon Investments Ltd of Hong Kong and MIE Holdings Corp to cancel an agreement without penalty in which it would have surrendered 39 percent of its equity in exchange for $100 million to pay down debt.
“I wish investors got out of it what they put into it … but market conditions are horrible, and we got caught on the wrong side of some acquisitions,” Andrew told the Herald. “From where they were sitting on Friday, when the stock was 16 or 17 cents per share, this offer is for 52; it’s a 200 percent lift. Short-term investors will be very happy; longerterm investors ...”
Andrew said the deal is expected to close in April, pending approval by stakeholders and regulators.
Long Run is the latest in a line of acquisitions by Chinese companies of Canadian energy firms.