Savanna sure to reject hostile bid: analysts
There is zero chance Savanna Energy Services Corp. shareholders will accept a hostile takeover bid from a competing oilfield services company, analysts say, although the bid could affect Savanna’s attempt to restructure its debts.
Total Energy Services Inc. announced its intention to buy all the outstanding shares of drilling company Savanna after markets closed Wednesday, marking the second time in two years the company has launched a hostile takeover of another Calgary-based oilfield provider.
Hostile bids were relatively unusual in the Calgary oilpatch before the price crash began but there have been several hostile takeover attempts since 2014, including Suncor Energy Inc.’s play for Canadian Oil Sands Ltd.
Total, which unsuccessfully attempted a hostile takeover of Strad Energy Services Ltd. in 2015, said that Savanna shareholders who own 43 per cent of the company were in favour of its proposed allshare deal — though Total has yet to formally make the offer to those same shareholders.
Total, which offers a range of oilfield services including rental equipment and drilling, said it had approached Savanna twice to negotiate a deal but the company had refused to engage in discussions about a transaction.
Savanna management did not respond to a request for comment.
BMO Capital Markets analyst Michael Mazar called Total’s move — announcing only an intention to bid — strange and unusual.
He also said there was “zero probability” that Savanna shareholders would agree to sell for the price Total is offering, which works out to $1.47 per share.
Savanna’s shares rose almost nine per cent Thursday to close at $1.60 each in Toronto.
Financial analysts surveyed by Bloomberg have an average 12-month target price of $2.33 per share on the stock.
Total did not respond to a request for comment.
Savanna announced Tuesday that it had struck a $200-million deal with AIMCo, a pension investment fund owned by Alberta’s government, to restructure its debt. The company also announced it would raise $18.8 million by issuing shares in a bought-deal underwritten by several investment banks.
CIBC World Markets analyst Jon Morrison said in a research note that the debt deal eliminated many “concerns from the company’s capital structure and leaving Savanna in a strong position to move forward and compete in the North American market and try to take advantage of the improving market conditions over the coming years.”
That debt-restructuring deal could be “in limbo” after Total’s announcement, Mazar said, because the deal with AIMCo has yet to close and because AIMCo could choose not to lend to Savanna, if Savanna immediately chooses to negotiate with Total.