Thursday August 28 4:21 PM EDT
Arakis holder says no interest in swap
By Jeffrey Jones
CALGARY, Aug 28 (Reuter) - A major Arakis Energy Corp shareholder said on Thursday he was pleased with the firm's corporate direction over the past month
and would have little interest in swapping his stock if a Lundin family controlled oil company made a bid.
Dan Rice, prominent fund manager for Boston-based State Street Research, said he would not be interested in becoming a holder of a merged International
Petroleum Corp (IRP.TO) and Sands Petroleum AB (SAPEB.ST) if the their ultimate goal was to take a run at Arakis, as was speculated on Wednesday.
Rice, who with over seven percent of Arakis's outstanding stock is its second-largest holder, made a similar comment earlier this year when faced with an exchange
proposal from Stockholm-based Sands, Arakis's biggest shareholder.
``It still holds,'' Rice told Reuters in a telephone interview. ``I don't want the paper.''
Sands and Vancouver-based IPC, both Lundin-family controlled oil companies engaged in international oil exploration and production, said on Wednesday they
were in merger talks.
The news fueled speculation the move was being made to create one firm with more assets to beef up an exchange ratio for an Arakis bid. IPC has a market
capitalization of about C$288 million, while Sands' current market value is about C$338 million.
Family representative Lukas Lundin said he was unable to comment on the merger talks until more information was made public, likely on Monday.
The Lundins have an 8.2 percent stake in Arakis through Sands and have one representative on its board.
Arakis and its partners -- China National Petroleum Corp, Malaysia state oil company Petronas and the Sudan government -- are developing a 12.2 million acre oil
concession in southern Sudan and are planning to build a 900-mile, 250,000 barrels a day pipeline to the Red Sea.
At its annual meeting in late July, Arakis shareholders elected a bigger roster of directors, including more independent members with experience in world oil circles.
The company had been criticized earlier for the board control held by Chairman Lutfur Khan and his longtime allies.
``The board is functioning like a board should. It appears to be very cohesive,'' Rice said. ``I'm very, very happy.
He also said the Sudan oil project was proceeding beyond his expectations, which meant Arakis would have to quickly arrange an estimated US$200 million in
financing.
The company said in July that it would attempt to come up with the funding in international debt markets.
Rice he believed Arakis could secure debt financing, but debt securities would likely have to be offered with a small equity sweetener.
``There will be modest dilution in the order of 10 or 15 percent,'' he said. ``The way I'm building my own models internally is that there will be some warrants
attached to the debt...it's minimal.''
A worst-case scenario would see Arakis farming out part of its 25 percent interest in the project to fund its portion, but even that would not be too onerous for
shareholders, he said.
``Quite frankly, this stock is cheap, even if they did a joint-venture farmout,'' he said.
It got a little more expensive on Thursday. Arakis shares on Nasdaq was up by 15/32 to 3-1/2 in busy trade of 1.4 million shares. |
