Calgary Herald Article
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Wednesday 14 April 1999
Westlinks assures doubters unusual bid 'very
serious'
Chris Varcoe, Calgary Herald
The tale of a corporate minnow trying to chase 40 fish in the oilpatch left
petroleum company executives in downtown Calgary bewildered and
astonished Tuesday.
Westlinks Resources Ltd., a junior oil and gas firm with four employees,
launched a series of 40 bids late Monday to obtain up to 25 per cent of
various-sized Canadian petroleum producers.
If successful, the fledgling company would see its market capitalization
swell from $4 million to more than $2 billion.
The news Tuesday caught most CEOs of the target companies by surprise,
but when trading in their shares was temporarily halted on stock exchanges
due to the development, few were laughing.
"You have to wonder about the credibility of this thing and whether it's really
going to come to pass," said J.C. Anderson, chairman of the senior oil
company bearing his name.
"It's bizarre,'' said Don West, chief executive of Rigel Energy Corp.
"If we had heard this on April 1, we probably wouldn't be worrying about it,''
added Baytex Energy Ltd. chief financial officer Raymond Chan.
"Being how the stock exchange É took the matter serious enough to halt
the trading of these group of 40 companies, I'm not sure we can take it as a
well-humoured prank."
Westlinks proposes to swap up to 1.6 billion of its shares traded on the
Alberta Stock Exchange, for stock of 40 oil and gas producers, including
well-known names such as Poco Petroleums Ltd. and Anderson Exploration
Ltd.
Westlinks isn't seeking control of these firms, but wants to create a basket
of undervalued oil and gas companies for investors.
The Canadian oilpatch -- which has seen record merger activity in recent
years -- has never seen one company attempt to buy stakes in so many
companys at once.
The offer quickly fuelled skepticism by some onlookers, but Westlinks
president Thomas Bamford maintained he has no intention of pulling back.
He began requesting shareholders' lists from various rival companies
Tuesday and will likely hold a news conference today to answer further
questions.
"The worst thing we could do is have a business plan that (we) blow up É
before it crosses the starting line. Why would you do that? That truly would
be frivolous," he said.
"And this is a very serious offer."
Bamford and Westlinks CEO Peter Sekera, former managers at Wascana
Energy Ltd., are "skilled analysts," said former co-worker Glenn Carley,
head of Magin Energy Inc., one of the targeted companies.
Sekera worked as manager of corporate finance for the TD Bank in Calgary
and completed the executive MBA program at Harvard University. Bamford
was employed by Saskatchewan Oil - later renamed Wascana - for 20
years as manager of budget and reserves.
Carley, a former Wascana vice-president, said he isn't sure how to take
their offer.
"To me, it's somewhere between flaky and brilliant, probably falling closer to
the flaky end,'' he said.
"If $100 million gets tendered, everyone is going to say they were brilliant. If
it flames out - as in theory it should - I don't know how much credibility
they'll ever have again."
Westlinks is offering shareholders a premium for their stock, averaging 58
per cent above last week's share prices for the targeted companies.
But the "currency" behind the stock-swap plan is the great unknown, Carley
added.
"It's like being offered É Canadian Tire money. You can quote that one,
because at the end of the day, you don't know what it's worth."
Analysts said the proposal would, in essence, transform tiny Westlinks into
a type of mutual fund of oil and gas stocks, through an ASE-traded stock.
Gord Currie of Canaccord Capital Corp. said few of the 40 companies pay
dividends and wouldn't create much cash flow for Westlinks, so it's unlikely
to attract much interest.
One large mutual fund manager with numerous holdings of the targeted
companies said he's not prepared to write off the offer yet, but needs more
details.
"I wouldn't dismiss it as a lark,'' he said, speaking on the condition of
anonymity. "(But) the chances of us tendering are quite small."
Meanwhile, the Alberta and Ontario Securities Commissions say they are
reviewing the multiple offers.
The proposal "raises significant and novel regulatory considerations,'' the
two commissions said in a news release. However, it is premature to say if
the proposal will be allowed to go ahead, said David Sheridan, legal counsel
for the Alberta commission.
"You should not discount we have serious concerns about this," said
Sheridan. "The key, then, is where the concerns go."
The Alberta commission is still sorting through the ramifications of the
Westlinks bids and must determine if investors can fully comprehend the
company's offer made Monday, he added.
"The press release quite frankly was premature and we've indicated that to
Westlinks," David Linder, executive director of the Alberta Securities
Commission, told The Canadian Press.
"The bigger issue which hasn't been examined is: Is this something that
makes sense. Is it in the public interest, is it likely to succeed? and those
things are all under scrutiny."
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