Busy weekend for the lawyers.... Paramount POU is taking over SUI Summit for $7.40 cash & a new trust is also being created.
Paramount Resources wants to form royalty trust
Paramount Resources Ltd POU
Shares issued 59,453,600 May 10 close $13.65
Mon 13 May 2002
Mr. Clayton Riddell reports
PARAMOUNT RESOURCES LTD. TO CREATE A NEW NATURAL GAS FOCUSED ...
Paramount Resources announced earlier today in Stockwatch that it has
entered into an agreement with Summit Resources Limited pursuant to which
Paramount will make a cash offer to acquire all of the common shares of
Summit. Concurrent with the announcement of the acquisition of Summit,
Paramount also announces that it is considering the creation of a new
royalty trust that would hold substantially all of Paramount's northeast
Alberta natural gas assets, upon completion of the transactions referred to
below.
Paramount believes these transactions will enhance value for shareholders
in a tax-effective manner. In essence, Paramount will add to its growth
assets with the acquisition of Summit, and at the same time, convey more
mature assets to shareholders in the form of a separate, publicly traded
royalty trust that will pay regular cash distributions.
The new royalty trust is expected to be formed through a special dividend,
by Paramount, of trust units to existing Paramount shareholders. The trust
would be granted an option to acquire certain assets from Paramount that
would be financed from a combination of conventional bank debt plus the
proceeds from a proposed rights offering of further trust units to the
trust unitholders. The trust units would be qualified for public
distribution and an application would be made to list the units on the
Toronto Stock Exchange.
The northeast Alberta natural gas assets to be acquired by the trust are
characterized by long production histories, strong cash flow and low-risk
drilling opportunities requiring minimal capital expenditures. Current
production from these assets is in excess of 100 million cubic feet per day
(16,667 barrels of oil equivalent per day at 6:1). The trust would operate
95 per cent of its production and would own and operate various gas
processing and compression facilities throughout the region. The trust
would also have approximately 500,000 net acres of undeveloped land.
The reserves to be acquired by the trust had a present value in excess of
$300-million as independently evaluated by engineering consultants,
McDaniel & Associates Consultants Ltd., as at Dec. 31, 2001. Paramount has
owned and operated the majority of these assets for several years and is an
experienced operator throughout the region. No Summit assets would be
conveyed to the trust.
In addition to an attractive asset base, Paramount intends to ensure the
trust will have a leading management structure amongst the oil and gas
royalty trust sector. The trust would be managed by a team of
professionals, staffed from existing Paramount employees, initially led by
Clayton H. Riddell as executive chairman during the transition phase, and
subsequently by Sue Riddell Rose, current corporate operating officer of
Paramount. The trust would be governed by a separate board of directors
including a majority of independent directors elected by the trust
unitholders. Paramount anticipates no employment losses arising from the
establishment of the trust.
Following the completion of the preceding transactions, Paramount
shareholders would own: (i) the same number of common shares as currently
held in Paramount, a high-growth, well-capitalized senior oil and gas
producer; and (ii) a proportionate number of trust units in a new royalty
trust that pays regular cash distributions from the production of natural
gas in northeast Alberta.
To oversee the creation of the proposed royalty trust, Paramount has formed
an independent committee of its board of directors. The independent
committee has a mandate to consider issues related to the formation of the
royalty trust, and in so doing is expected to engage independent legal and
financial advisers. The transaction will be subject to the receipt of all
necessary regulatory approvals and consents.
BMO Nesbitt Burns Inc., CIBC World Markets Inc. and FirstEnergy Capital
Corp. are acting as financial advisers to Paramount with respect to the
acquisition of Summit and the proposed creation of the royalty trust.
Conference call and investor presentation
Paramount will discuss this transaction in a conference call Monday, May
13, 2002. The conference call will begin at 9 a.m. Mountain Time (11 a.m.
Eastern Time). To participate, please call 1-800-379-5831. A recording of
the conference call will be available until May 21, 2002. Those interested
should dial 416-626-4100 and quote reservation No. 20603893. A copy of an
investor presentation describing the proposed transactions will also be
available on Paramount's Web site after the conference call.
=-=-=-=-=-
Paramount Resources to acquire Summit Resources
Paramount Resources Ltd POU
Shares issued 59,453,600 May 10 close $13.65
Mon 13 May 2002 News Release
Also Summit Resources Ltd (SUI)
Mr. Clayton Riddell of Paramount Resources reports
PARAMOUNT RESOURCES LTD. AND SUMMIT RESOURCES LIMITED ANNOUNC ...
Today in Calgary, Paramount Resources and Summit Resources Limited have
entered into an agreement pursuant to which Paramount will make an offer to
purchase all of the issued and outstanding common shares of Summit for cash
consideration of $7.40 per share. The total value of the offer is
approximately $332-million, including assumed indebtedness (net of option
proceeds) of Summit of approximately $80-million as at March 31, 2002. The
all-cash offer represents a 19-per-cent premium over Summit's closing share
price of $6.21 on the Toronto Stock Exchange on May 10, 2002.
The acquisition of Summit will be financed through a combination of a
senior secured credit facility and a subordinated bridge facility provided
by a syndicate of Canadian chartered banks. Paramount expects the bridge
facility will be repaid by October, 2002.
Shareholders of Summit holding approximately 55 per cent of the issued and
outstanding common shares of Summit (calculated on a diluted basis) have
signed agreements pursuant to which they have agreed to tender all of their
shares to the offer on a hard lock-up basis. Such shareholders have also
agreed not to solicit other offers.
The offer has the unanimous support of the boards of directors of both
Paramount and Summit. In addition, the board of directors of Summit has
been advised by its financial advisers and has determined unanimously that
the offer is fair, from a financial point of view, to the shareholders of
Summit, and is in the best interests of Summit and its shareholders, and
will recommend that Summit shareholders accept the offer. Paramount expects
that minimal employment losses will occur as a result of this transaction.
Summit has agreed not to solicit further offers and has reserved the right
to respond to a superior proposal in accordance with the terms of the
agreement. The offering circular associated with the transaction is
expected to be mailed to Summit's shareholders shortly and the Offer will
expire 35 days thereafter. The offer is conditional on, among other things,
at least 66-2/3 per cent of the Summit common shares (calculated on a
diluted basis) being tendered and receipt of all necessary regulatory
approvals and consents, and on conditions customary in transactions of this
nature.
As at Dec. 31, 2001, Summit's independent engineers have recognized 115.6
billion cubic feet of proven natural gas reserves (150.3 billion cubic feet
proven plus probable) and 10.5 million barrels of proven oil and natural
gas liquids (14.2 million barrels proven plus probable) with a reserve life
index of 6.0 years (7.9 years proven plus probable). In addition, Summit
holds over 376,500 net acres of undeveloped land throughout Alberta,
British Columbia, Saskatchewan, Montana and North Dakota. Summit reported
first quarter 2002 production of 52.3 million cubic feet per day of natural
gas and 4,812 barrels per day of oil and natural gas liquids (13,531
barrels of oil equivalent per day at 6:1).
"We are pleased to have the opportunity to add the assets of Summit and its
high-quality people to Paramount. This transaction is of strategic
importance to Paramount as the overlap of key assets is very high. Summit's
properties complement Paramount's growing west-central Alberta core area
and use of existing Paramount operated infrastructure in the region will
also create value through greater efficiencies and accelerated production,"
said Clay Riddell, Paramount's chairman and president.
Don Nelson, president of Summit, stated: "The Paramount offer recognizes
the high quality of Summit's assets and employee group. The cash offer
provides Summit's shareholders with liquidity at a significant premium to
recent trading prices."
BMO Nesbitt Burns Inc., CIBC World Markets Inc. and FirstEnergy Capital
Corp. have acted as financial advisers to Paramount in respect of the
transaction and will be acting as joint dealer managers for Paramount.
Peters & Co. Limited has acted as financial adviser to Summit and has
provided a fairness opinion that the offer is fair, from a financial point
of view, to the shareholders of Summit.
In view of the foregoing, the annual meeting of shareholders of Summit
scheduled for May 16, 2002, has been postponed until further notice.
Shareholders will be advised of the new date in due course. |
