Wednesday, May 6, 1998
Canadian Hunter going public
EdperBrascan will continue to hold 40% controlling interest
By CLAUDIA CATTANEO
Calgary Bureau Chief The Financial Post
It's unlikely Canadian Hunter Exploration Ltd., currently a unit of Noranda Inc., will be swallowed in a takeover when it goes
public this summer, president Steve Savidant said yesterday.
That's because its major shareholder, EdperBrascan Ltd., plans to hold on to its 40% controlling interest, Savidant said.
Another 30% of the shares are owned by institutions and the rest are widely held.
"They [EdperBrascan] very much like North American natural gas, and what they said to us is that they like what Canadian
Hunter is doing, and our strategy for growing the company," he said.
EdperBrascan is a Toronto holding company that was formed last year through a merger of Edper Group Ltd. and Brascan
Ltd., Noranda's longtime major shareholder.
Savidant said Canadian Hunter will become publicly traded after its shares are distributed as a special dividend to Noranda
shareholders, which last fall decided to shed some of its units as part of a plan to return to its mining roots.
Canadian Hunter's sister company, Norcen Energy Resources Ltd., was sold to Houston-based Union Pacific Resources
Group Inc. in January as part of the same strategy.
The going-public transaction is expected in August following the conclusion of discussions with Noranda about various issues,
including how much debt, tax pools and capital structure Hunter will inherit.
"What Noranda and Hunter have talked about is having a capital structure that allows it to proceed with its growth strategy.
And both sides want to do that," Savidant said.
Those discussions are expected to continue for the next five or six weeks until a separation agreement is completed.
"We're looking at spending something more than our internally generated cash flow, and hope to have a balance sheet that will
enable us to raise additional capital, probably through debt,'' he said.
Canadian Hunter is a large producer focused on western Alberta and northeastern B.C. Its daily production is 340 million
cubic feet of natural gas equivalent daily -- 90% gas. It operates 85% of its production and it markets gas from its own and
other sources.
In 1997, it had a capital spending program of $170 million, exceeding its cash flow by about 5%. Savidant said he expects the
company to spend at least another $170 million this year and to have higher cash flow than in 1997.
He said Canadian Hunter performed poorly in the early 1990s, when its corporate focus was "elephant hunting," the oil
industry term for high-cost, high-risk exploration activities that can sometimes pay off with large discoveries.
In 1995, he said, the company switched to lower-risk exploration and development strategy, and saw strong improvements in
earnings and cash flow in the following two years.
Canadian Hunter's current growth strategy is based on adding new core areas, developing mid-stream operations such as
pipelines and expand internationally. Canadian Hunter will likely seek to fund the expansion from sources other than cash flow.
Under the distribution, shareholders of Noranda will end up with the same proportion of ownership in Canadian Hunter,
although they may receive a smaller number of shares.
Savidant said the company plans to list on the Toronto and Montreal stock exchanges.
-- with files from Dow Jones |
