MERGERS & ACQUISITIONS / Poco goes for Pan East
Poco Petroleums Ltd. launches friendly bid for Pan East Petroleum Corp. and $171,000,000 common share issue
CALGARY, Nov. 2 /CNW/ - Poco Petroleums Ltd. (''Poco'') and Pan East
Petroleum Corp. (''Pan East'') jointly announced today that Poco has agreed to
make an offer to acquire all of the issued and outstanding shares of Pan East.
The offer will provide that Pan East shareholders will receive $2.65 cash or,
at the election of each Pan East shareholder, 0.1797 of a Poco common share,
or a combination thereof, for each Pan East common share tendered, subject to
a maximum of four million Poco common shares to be offered. The Pan East
closing price on October 30, 1998 was $2.38 per share. The offer represents an
approximate 23 percent premium to the weighted average closing price of the
Pan East common shares for the 20 days prior to the announcement of the offer.
If all Pan East common shares are tendered, the value of the offer will be
approximately $163 million. Lehman Brothers Canada Inc. and RBC Dominion
Securities Inc. acted as financial advisors to Poco.
The offer has the unanimous support of the Independent Committee and the
Board of Directors of Pan East. Peters & Co. Limited provided exclusive
financial advice to the Independent Committee of Pan East and has provided an
opinion that the offer is fair from a financial point of view to the
shareholders of Pan East. The offer is subject to all necessary regulatory
approvals and to customary conditions, including that a minimum of 66 2/3 per
cent of the outstanding Pan East common shares, calculated on a fully diluted
basis, be tendered.
Poco has entered into an agreement with Pan East pursuant to which, among
other things, the Board of Directors of Pan East has agreed not to solicit
competing bids and to recommend acceptance of the offer to holders of Pan East
shares. Pan East has agreed to pay Poco a break fee of $5 million in certain
circumstances.
Poco has also entered into agreements with certain Pan East shareholders,
representing 28 percent of the outstanding common shares, to tender to the
offer. These shareholders have agreed not to withdraw their shares from Poco's
offer and tender to a competing bid for Pan East, except in certain
circumstances and under particular terms.
It is anticipated a take-over bid circular containing the details of the
offer will be mailed to all registered shareholders of Pan East on November 6,
1998.
To fund the Pan East purchase, Poco announced that it has reached
agreement to issue from treasury, on a bought deal basis, 12,000,000 common
shares at $14.25 per share, for gross proceeds of $171,000,000. The syndicate
will be led by RBC Dominion Securities Inc. and includes FirstEnergy Capital
Corp., Nesbitt Burns Inc., Bunting Warburg Inc., ScotiaMcLeod Inc., CIBC Wood
Gundy Securities Inc., Lehman Brothers Canada Inc., TD Securities Inc. and
Newcrest Capital Inc.
Pan East has entered into an agreement with Chesapeake Energy Corporation
and Chesapeake Canada Corporation (collectively ''Chesapeake'') whereby Pan
East has the option to terminate its existing joint venture with Chesapeake
and to acquire certain oil and gas interests of Chesapeake earned pursuant to
its joint venture with Pan East. Under the option, the joint venture interests
held by Chesapeake may be exchanged for interests of Pan East in the Midwinter
area of British Columbia and a cash payment to Chesapeake of $8 million.
Pan East's current production is 3,100 barrels of oil equivalent per day
composed of 28 million cubic feet per day of natural gas and 300 barrels per
day of liquids. Proven and probable reserves consist of 2.16 million barrels
of crude oil and natural gas liquids and 202.5 billion cubic feet of natural
gas. Pan East also has 130,000 net acres of undeveloped land and an extensive
seismic database which Poco values at an aggregate of $25.6 million.
The Pan East transaction is consistent with Poco's business plan, which
continues to focus on the exploration, development and acquisition of natural
gas assets in the deeper, more prolific portion of the western Canadian
sedimentary basin. Poco's exploration program is focused on its Western Region
in west-central Alberta. The Pan East assets are either within this Western
Region or adjacent thereto. Of particular interest are the assets located at
Berland River, Edson, Lator and Ram Strachan. Pan East also holds strategic
interests in several processing and transportation facilities in these areas.
These facility interests will assist Poco in bringing on production quickly
and at lower costs. Poco sees significant exploration potential in the Pan
East assets and believes that this acquisition gives it a strategic advantage
in expanding Poco's core area further west to a deeper, less explored part of
the basin. The offer will also allow Pan East shareholders an opportunity to
participate in the future growth potential of Poco shares.
Poco will be conducting a conference call to discuss the transaction
beginning at 7:15 a.m. Mountain Standard Time on November 2, 1998. The call
can be joined in progress by dialing 1-888-209-3769 or interested parties may
listen to a taped recording after 9:15 a.m. Mountain Standard Time by dialing
1-800-558-5253 and entering reservation number 1783702.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy the securities in any jurisdiction. The common
shares offered will not be or have not been registered under the United States
Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration, or an applicable exemption from the
registration requirements of such Act.
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For further information: Craig Stewart, President and Chief Executive
Officer, Poco Petroleums Ltd. (403) 260-8017; John Ferguson, Vice President
and Chief Financial Officer, Poco Petroleums Ltd. (403) 260-8059; Richard
Walls, President and Chief Executive Officer, Pan East Petroleum Corp.
(403) 234-7477; Robert Maitland, Vice President, Finance and Chief Financial
Officer, Pan East Petroleum Corp. (403) 234-7477; E-mail: ir@pocopete.ca;
Website: www.pocopete.ca
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