Calgary Herald Article: April 15
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Thursday 15 April 1999
Oilpatch rallies against bid by Westlinks
Chris Varcoe, Calgary Herald
Upstart Westlinks Resources Ltd. could face a united front of large and
small rivals as it attempts to snag significant stakes in 40 Canadian oil and
gas companies.
The junior oil and gas company startled the oilpatch this week with an
unusual bid to swap up to 1.6 billion of its shares for stock in established
petroleum producers such as Crestar Energy Inc., Anderson Exploration
Ltd. and Poco Petroleums Ltd.
Many of the targets consider the offer more of a nuisance than a real threat,
but phone lines have been heating up since Tuesday about how to defend
against the simultaneous hostile bids.
"I think a united front makes business sense,'' Raymond Chan, chief
financial officer with mid-sized Baytex Energy Ltd., one of the targeted
firms, said Wednesday.
"It makes no sense for companies to be going out on their own."
Under Westlinks' plan, which still must be approved by security regulators
in Alberta and Ontario, the Calgary company wants to gain up to 25 per
cent of firms like Baytex.
Analysts describe the move as an attempt to create a closed-end mutual
fund of undervalued energy stocks through Westlinks, a tiny company with
four employees whose stock is traded on the Alberta Stock Exchange.
"It's fair to say that we're not a happy group,'' said Crestar chief executive
Barry Jackson. "Certainly, a number of us have at least had phone calls
back and forth talking about what things we might or might not do."
Officials with Westlinks were unavailable for comment Wednesday, but
company CEO Peter Sekera said Monday he understood there were no
impediments to making such an offer.
However, it appears Westlinks must overcome regulatory concerns and
possible legal attacks by the target companies.
The Alberta and Ontario securities commissions are reviewing the proposal
and have expressed some concerns.
Stan Magidson of the Ontario Securities Commission said that his
organization is focusing on the question of "public interest" concerns and
will make a statement today.
"I expect (our) staff's view will gel tomorrow,'' he said late Wednesday.
Some of the targeted petroleum producers say they're concerned the
proposed bids are so complex - offering shareholders of each company
different percentages of Westlinks stock - that retail investors will have
difficulty understanding the total package.
Poco Petroleums vice-president Darryl Proudfoot said if the offer makes it
past regulatory scrutiny, his company would attempt to block it through the
courts.
"We would apply for an order to have it squashed,'' he said.
The company has already expressed its concerns informally with regulators,
said Calgary securities lawyer Grant Zawalsky, who represents Poco.
If necessary, Poco would initiate legal action by arguing that the bid lacks
proper disclosure, as individual investors don't know how big Westlinks will
be once the multiple offers close - or how much of it they'll own, he said.
There is no minimum number of shares to be tendered for the 40 separate
bids to proceed.
Zawalsky said he'd also argue that Westlinks will become a type of mutual
fund, but isn't listed as such on the ASE.
Not everyone thinks action is necessary.
One of the smallest companies in the group of 40, Backer Petroleum Corp.,
isn't interested in wasting any money fighting Westlinks and expects it will
fail on its own.
"I think they're on a fishing trip and hoping a number of smaller (companies)
in the group tumbles,'' said Backer CEO David Mercier.
Westlinks issued a statement Wednesday about regulatory questions,
noting the intended takeover bids "are subject to compliance with all
applicable laws and regulations."
"The Alberta Stock Exchange has not approved the transaction and may not
approve it in its current format,'' the company stated.
David Sheridan of the Alberta Securities Commission said he has requested
additional information from Westlinks, but hadn't heard back from it by late
Wednesday afternoon. |
