HORIZON DEMANDS THAT THE BOARD PROPERLY DISCLOSE THE DETAILS OF THE CAD $21.4 MILLION OIL PLUS BENEFITS TO BE PAID TO AMERICAS PETROGAS BY THE ARGENTINE GOVERNMENT AS A RESULT OF DECREE NO. 1330/2015 OF JULY 6, 2015
HORIZON DEMANDS THAT THE BOARD POSTPONE THE MEETING TO ALLOW SHAREHOLDERS TO PROPERLY EVALUATE THE PROPOSED TRANSACTION ONCE ALL MATERIAL INFORMATION HAS BEEN PROVIDED BY THE BOARD
HORIZON REQUESTS THAT BARCLAY HAMBROOK AND CARLOS LAU IMMEDIATELY RESIGN FROM ALL THEIR POSITIONS AND THAT THE NEW BOARD APPOINT A NEW CEO
PANAMA CITY, Republic of Panama, July 20, 2015 /CNW/ – Horizon Capital Management Inc. (“Horizon“) issued today a public statement calling upon all shareholders of Americas Petrogas Inc. (“Americas Petrogas” or the “Company“) (TSXV: BOE) to VOTE FOR Horizon's three independent and highly qualified nominees (the “Horizon Nominees“) to the board of the Company (the “Board“) and urging shareholders once again to VOTE AGAINST the proposed sale by the Company of all of the outstanding common shares of Americas Petrogas Argentina S.A. (“APASA“) to Tecpetrol International S.A. and its affiliates (“Tecpetrol“) and related transactions (the “Proposed Transaction“) at the upcoming shareholders meeting currently scheduled for July 29, 2015 (the “Meeting“).
Juan Argento, Senior Advisor of Horizon, said, “A number of shareholders have reached out to us to express their agreement with the concerns we raised in our press release of July 6, 2015. These shareholders have indicated to us that in the aggregate they hold a significant ownership interest in the Company and have emphasized their deep dissatisfaction, not only with the terms of the Proposed Transaction, but, more importantly, with the current management team. They believe that the current management will continue to destroy value for shareholders and will waste the cash proceeds to be received if the Proposed Transaction is to be completed. They want the current management team to be replaced immediately. We agree, and, as a result, we have decided to take action by nominating three new directors to the Board and calling for the immediate resignation of Barclay Hambrook and Carlos Lau“.
As a shareholder, you can VOTE FOR the Horizon Nominees using the form of proxy or voting instruction form that you received with your Meeting materials from the Company. You must act quickly and before the deadline of 9:00 a.m., Mountain Time, on Monday July 27, 2015 (or any earlier deadline indicated by your broker). Please carefully read and follow the instructions below under the heading “How to Vote for the Horizon Nominees” for more information about how to support the Horizon Nominees. While Horizon urges all shareholders to VOTE AGAINST the Proposed Transaction, even if you vote for the Proposed Transaction you can still VOTE FOR the Horizon Nominees to protect the value of your investment if the Proposed Transaction is completed.
Even if you have already voted for management's director nominees or for the Proposed Transaction, you can change your vote by submitting another form of proxy or voting instruction form bearing a later date prior to the deadline above (or, if you are a registered shareholder, by attending the Meeting and voting in person).
The full text of the public statement to Americas Petrogas shareholders is as follows:
Dear Fellow Americas Petrogas Shareholders:
First, we would like to clarify that we are NOT a hedge fund and that we have NO history whatsoever of “exploiting vulnerable companies with attractive assets” as Barclay Hambrook falsely represents in his latest letter to shareholders. As we expressed in our July 6 press release, Horizon is a merchant banking firm with advisory and principal investment activities and with substantial focus on the oil and gas industry in Latin America.
We made a passive investment in the Company to gain exposure to (A) its attractive conventional and unconventional assets in Argentina, (B) the likely future recovery in oil prices and (C) the likely improvement in the business environment in Argentina after the October 2015 elections. However, not long after we became shareholders, the Company announced the Proposed Transaction that is clearly not in shareholders' best interests given that: (1) it provides for a sale of the Company's principal assets for cash, while not providing any distribution of proceeds to shareholders, (2) the Company has not disclosed any meaningful details about how it plans to spend the USD $63 million in proceeds the Company is retaining, and (3) the Proposed Transaction appears to be designed to simply allow management to continue to fund their outsized compensation. We were furious and we decided to speak our mind. Since doing so, we have learned many of our fellow shareholders agree with us.
Many Shareholders agree with our views and want the current management replaced
In the days after our press release of July 6, 2015, we have heard from a number of shareholders, many of whom have been investors in the Company for years, some since before the Company went public. A number of them know Barclay Hambrook and Carlos Lau well. These shareholders have indicated to us that in the aggregate they hold a significant ownership interest in the Company. They expressed their agreement with the concerns we raised in our July 6 press release:
- They would like to see an alternative to the Proposed Transaction.
- The valuation of the Proposed Transaction is unattractive and it is a terrible time to sell.
- It is unconscionable that the Company is retaining the USD $63 million in proceeds without providing any liquidity to shareholders in the context of the sale of substantially all of its assets.
- It is irresponsible for the Company to not provide any details of its business plan and the use of the cash proceeds if the Proposed Transaction is completed.
Furthermore our fellow shareholders expressed that:
- They are extremely disappointed with the historical performance of the current management team.
- They believe this management team is an impediment for the Company to secure financing on attractive terms.
- They believe the current management will waste the cash proceeds received from the Proposed Transaction through poor investments and excessive general and administrative (“G&A“) expenses.
- They have no confidence in the value proposition of the remaining assets.
- They have serious complaints regarding a continuous lack of transparency and disclosure by the Company.
- They would like to see new independent and highly qualified nominees elected to the Board.
- They would like Barclay Hambrook and Carlos Lau to resign and for the new Board to look for new management.
The facts demonstrate that the performance of this management team has been dismal:
- The Company's stock price has decreased 93.9% from a high of CAD $4.51 in 2012 to CAD $0.28 today.
- According to Capital IQ, the Company has raised over CAD $253 million in equity capital since 2005, while the market currently values the Company at only CAD $63 million.
- Other close peers, such as Madalena Energy, Crown Point Energy, Canacol Energy, Parex, and Gran Tierra Energy, have performed considerably better and have all recently secured financing to continue to expand their businesses.
- The G&A expenses of the Company have been inexplicably high, by far the highest in its peer group relative to the size of the Company.
- Management has been unable to secure the necessary financing to continue to develop the Company's principal assets in Argentina. This is a major failing on the part of management.
We fully share the views of our fellow shareholders and have decided to take action on behalf of all shareholders by nominating the three new independent and highly qualified Horizon Nominees and requesting the immediate resignations of Barclay Hambrook and Carlos Lau from the Board and from their management positions and the immediate appointment of a new CEO by the Board that can effectively: (i) rein-in expenses, (ii) define a clear budget that can be presented to the Board and disclosed to shareholders, (iii) establish proper capital allocation parameters, (iv) carry out the sale or spin-out of GrowMax and (v) assess the potential for other asset divestitures.
The Horizon Nominees are:
Juan Argento. Mr. Argento is a Senior Advisor to Horizon Capital. Prior to joining Horizon, Mr. Argento held senior positions at Millennium Global, a London-based USD 13 billion investment firm, Rubikon Partners, a mid-market private equity firm, focused on the European market and chaired by Dr. Henry Kissinger, Texas Pacific Group and Salomon Brothers Inc. He has been Chairman and/or a board member of several private companies in Latin America and the CEO of a technology company in Latin America. He holds an A.B. in Economics with honors from Harvard University.
Aris Tsikouras. Aris is a consultant with Horizon Capital. Previously, Aris was a Senior Partner with McKinsey & Company over the past 16 years. While at McKinsey, he was based out of New York, Athens, São Paulo, and most recently Rio de Janeiro. Aris led more than 80 strategic, operational, and organizational projects with electricity, oil, and gas clients in emerging markets. He led McKinsey's Oil & Gas Hub in Rio de Janeiro as well as the firm's Global Emerging Markets Power & Gas Practice. Aris holds a M.S. in Engineering-Economic Systems from Stanford University and a M.Eng. in Engineering, Economics, and Management from Oxford University.
Alex Zyngier. Mr. Zyngier is a shareholder of the Company, a restructuring and turnaround expert, a graduate of the University of Chicago's MBA program and has held important positions in first-rate firms such as Goldman Sachs, McKinsey & Company and Deutsche Bank.
If you wish to VOTE FOR the Horizon Nominees, you must act quickly and before the deadline of 9:00 a.m., Mountain Time, on Monday July 27, 2015 (or any earlier deadline indicated by your broker). Please carefully read and follow the instructions below under the heading “How to Vote for the Horizon Nominees” for more information about how to support the Horizon Nominees to support the Horizon Nominees.
Lack of disclosure of the Oil Plus benefits
The Company has not disclosed to shareholders vital information regarding its Oil Plus benefits that materially affects the value of the Company. On July 6, 2015, the government of Argentina issued Decree No. 1330/2015, which acknowledges an Oil Plus-related debt of USD $784 million payable to certain oil companies, and authorizes the Argentine State to pay such debt through delivery of the equivalent par value amount in USD-denominated sovereign debt notes (i.e., BONAD 2018 and BONAR 2024). These notes trade near par value through liquid secondary markets, and can directly or indirectly be sold for cash in USD outside of Argentina. Given that the Company has disclosed that it is entitled to CAD $21.4 million in such benefits, this means that the Company has access to nearly CAD $21.4 million of cash in the short term. Such amount could easily fund the Company's operations for the foreseeable future.
This is a material change that the Company has failed to disclose in violation of Canadian securities laws and completely undermines the Company's argument that it is running out of cash and that it has no alternative other than to complete the Proposed Transaction. Such cash inflow would improve the cash position of the Company and its negotiating position with Tecpetrol or other third parties that may be interested in purchasing or financing the Company or its assets.
It is important to note that the CAD $21.4 million of Oil Plus benefits have not been recognized in the Company's financial statements to date.
Furthermore, the management information circular for the Proposed Transaction fails to disclose the allocation of this CAD $21.4 million between Tecpetrol and the Company if the Proposed Transaction is completed. In fact, these numbers have been redacted in the materials sent to shareholders. This payment is a material fact that is fundamental to the decision of shareholders of whether to support the Proposed Transaction and the intentional failure of the Company to disclose this vital information is both misleading and unacceptable. We demand that the Company come clean and disclose this information immediately. We wonder: what is the Company attempting to hide?
The Company has not addressed any of our concerns
The Company has not addressed any of the concerns we raised in our July 6 press release:
- It rejected delaying the Meeting, which would allow for more time to (i) collect the Oil Plus benefits, (ii) provide full disclosure of all material information, G&A reduction and a future business plan (including 2015 guidance), and (iii) renegotiate the terms of the Proposed Transaction with Tecpetrol or a different party from a stronger financial position.
- It rejected providing any cash distribution to shareholders.
- It argues that there is no misalignment with IFFCO, when there clearly is.
- It did not disclose any details of the fairness opinion.
The Company's latest letter to shareholders is yet another attempt to continue to mislead shareholders
- The Company claims that it “needs to complete the Transaction to meet its short term working capital obligations”. This statement is untrue, as the Company could use the CAD $21.4 million of Oil Plus benefits to fund operations for the foreseeable future.
- The Company has not provided any detail about its intended business plan, including no forward guidance on G&A expenses or capital expenditures.
- The Company claims that it “will retain a number of its high potential Argentina assets with near-term cash flow prospects”. The retained assets are early-stage, high-risk, and there is no certainty of cash flows in the near future. We don't understand how the Company can sell the assets that have been de-risked such as Los Toldos and Medanito Sur, not return any money to shareholders and use the cash proceeds to gamble away shareholders money by investing in the remaining early-stage, high-risk assets. If these assets are worth investing in, the Company should be able to secure financing for the assets on their own merits and not have to deplete the proceeds of the Proposed Transaction.
- The Company insists that the Proposed Transaction is fairly-priced as it represents a premium over the 30-day VWAP. What it fails to recognize is that, at the time the Proposed Transaction was announced, the stock was at an all-time low due to a combination of years of mismanagement and poor timing of the sale.
- The Company claims that it has followed “a lengthy and extensive global review process” and that the Proposed Transaction “represents the best current, real-world alternative available to the Company”. What it fails to disclose is that over that lengthy review process it received more attractive offers for specific assets and for the Company as a whole than the Proposed Transaction with Tecpetrol, which the Company rejected, and it also fails to mention the availability of the CAD $21.4 million Oil Plus benefits.
- The Company continues to withhold the details of the fairness opinion conducted by Mackie Research Capital Corporation.
- The Company argues that senior management “are not being rewarded in connection with the [Proposed] Transaction” when, in fact, both CEO Barclay Hambrook and Chairman Carlos Lau will continue to received their outsized compensation packages, funded by the USD $63 million that will be paid under the Proposed Transaction. Furthermore, why does the Company need to pay for three full-time senior management positions (Hambrook, Lau and Vaca Coca) when all it needs is one strong CEO?
- The Company has promised to accelerate the spin out of Growmax. The question is why has it taken the Company so long? They have been talking about such spin out since 2010. We think a properly executed (and valued) spin out is essential to be able to address the unacceptable misalignment of incentives with IFFCO and with Carlos Lau, whose close relative holds, on behalf of a Peruvian group, a significant interest in Growmax's Bayovar project.
- The Company complains that “Horizon has never offered to introduce Americas Petrogas to the parties it claims have expressed interest in financing the Company”. We believe the current management team is more than properly compensated to effectively carry out their obligations, including securing financing for the Company, and Horizon, as a shareholder, has no obligation to do the job of the management. Why have the Company's peers secured financing while the Company has been unable to do so? We believe there are two main reasons: (i) this management team is not trusted by existing and prospective investors, and (ii) management is putting their personal interests ahead of those of shareholders.
- Horizon demands that the Board properly disclose the details of the CAD $21.4 million Oil Plus benefits that the Company is entitled to receive.
- Horizon demands that the Board postpone the Meeting to allow shareholders to properly evaluate the Proposed Transaction once all material information has been provided by the Board.
- Horizon urges all shareholders to VOTE FOR the independent and highly-qualified Horizon Nominees
- Horizon requests that Barclay Hambrook and Carlos Lau immediately resign from all their positions and that the new Board appoint a new CEO.
- Horizon reiterates its call for shareholders to VOTE AGAINST the Proposed Transaction with Tecpetrol.
HOW SHAREHOLDERS CAN VOTE FOR THE HORIZON NOMINEES
You can vote for the Horizon Nominees using the form of proxy or voting instruction form that you received with your Meeting materials by doing the following prior to the deadline of 9:00 a.m., Mountain time, on Monday July 27, 2015 (or any earlier deadline indicated by your broker):
- insert the name “Christopher Sunstrum” (the “Horizon Representative“) as your proxy nominee in the blank space provided on your form of proxy or voting instruction form (Mr. Sunstrum is a partner with Goodmans LLP, Horizon's legal counsel);
- do not provide any voting instructions for the election of directors (i.e., do not check any of the “for” or “withhold” boxes for any of management's director nominees); and
- otherwise properly complete, sign, date and return your form of proxy or voting instruction form (either by mail or via the Internet) by carefully following the instructions provided on your form of proxy or voting instruction form. You cannot vote by telephone if you want to support the Horizon Nominees.
Your form of proxy or voting instruction form must be submitted prior to 9:00 a.m., Mountain Time, on Monday, July 27, 2015 (or any earlier deadline indicated by your broker). Horizon encourages shareholders to submit their proxies and voting instructions (in accordance with the instructions provided above) via the Internet to ensure they are submitted prior to the deadline.
Please also send a copy of your form of proxy or voting instruction form (or a written confirmation if you vote via the Internet) to the attention of Juan Argento at E-mail: email@example.com.
If you appoint the Horizon Representative as your proxy nominee with discretionary authority for the election of directors, your common shares will be voted FOR the Horizon Nominees and for the following management nominees: Ken Geren, Easton Wren and Ross C. McCutcheon. This will guarantee some necessary continuity, the necessary number of Canadian directors, and technically qualified members in the Reserves and Governance committees.
Even if you have already voted for management's director nominees, you can change your vote by executing another form of proxy or voting instruction form bearing a later date and submitting depositing it prior to the deadline above or, if you are a registered shareholder, by attending the meeting and voting in person.
If you have misplaced your form of proxy or voting instruction form, or if you have any questions or need assistance in completing and submitting your proxy or voting instruction form or changing your vote, please contact Juan Argento at Tel: +1 347 759 6074 E-mail: firstname.lastname@example.org.
INFORMATION IN SUPPORT OF PUBLIC BROADCAST SOLICITATION
The following information is provided in accordance with Canadian corporate and securities laws applicable to public broadcast solicitations. Horizon is relying on the exemption under section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102“) to make this public broadcast solicitation. This solicitation is being made by Horizon and not by or on behalf of the management of Americas Petrogas. The registered office address of Americas Petrogas is 3911 Trasimene Crescent S.W., Calgary, Alberta T3E 7J6.
Horizon has filed this press release containing the information required by section 9.2(4)(c) of NI 51-102 and has filed a separate document containing the information required by Form 51-102F5 – Information Circular in respect of the Horizon Nominees for election to the board of directors of the Company at the Meeting, including any and all adjournments or postponements thereof, on the Company's profile on SEDAR at www.sedar.com.
Horizon may solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. All costs incurred for the solicitation will be borne by Horizon.
A registered holder of common shares of Americas Petrogas that gives a proxy may revoke it: (a) by completing and signing a valid proxy bearing a later date and returning it in accordance with the instructions contained in the form of proxy, or as otherwise provided in Americas Petrogas' management information circular; (b) by depositing an instrument in writing executed by the shareholder or by the shareholder's attorney authorized in writing, as the case may be: (i) with Computershare Trust Company of Canada, at any time, not less than 48 hours, excluding Saturdays, Sundays and statutory holidays in the Province of Alberta, preceding the Meeting or an adjournment or postponement thereof; (ii) at the registered office of Americas Petrogas at any time up to and including the last business day preceding the Meeting or any adjournment or postponement thereof, or (iii) with the chairman of the Meeting prior to its commencement on the day of the Meeting or any adjournment or postponement thereof; or (c) in any other manner permitted by law.
A non-registered holder of common shares of Americas Petrogas will be entitled to revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary. It should be noted that revocation of proxies or voting instructions by a non-registered holder can take several days or even longer to complete and, accordingly, any such revocation should be completed well in advance of the deadline prescribed in the form of proxy or voting instruction form to ensure it is given effect in respect of the Meeting.
Horizon Capital Global Investments Inc., an affiliate of Horizon, has beneficial ownership over 12,757,000 common shares of Americas Petrogas, representing approximately 5.72% of the issued and outstanding common shares of Americas Petrogas.
With the exception of the foregoing, to the knowledge of Horizon, none of Horizon or any of the Horizon Nominees or any of their respective associates or affiliates has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter currently known to be acted upon at the Meeting other than the election of directors. In addition, none of Horizon or any of the Horizon Nominees or any of their respective associates or affiliates has any material interest, direct or indirect, in any transaction since the beginning of the Company's most recently completed financial year or in any proposed transaction that has materially affected or would materially affect the Company or any of its subsidiaries.
ABOUT HORIZON CAPITAL MANAGEMENT INC.
Founded in 2004, Horizon Capital Management Inc. is a merchant banking firm with advisory and principal investment activities and with substantial focus on the oil and gas industry in Latin America.
All statements, other than statements of historical fact, included in this news release constitute “forward-looking information” as such term is defined in applicable Canadian securities legislation. Forward-looking information can generally be identified by the use of forward-looking language such as “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “believe” or “continue” (and grammatical variations and the negatives thereof) and include statements concerning Horizon's intentions and strategies regarding the Company, support for the Horizon Nominees, the impact of the Horizon Nominees, and the impact on the financial condition, operation, business, strategies and competitive position of the Company and its future management if the Proposed Transaction is not approved by the shareholders or the Horizon Nominees are elected. Such forward-looking information is based on certain understandings, assumptions, beliefs, opinions and expectations of Horizon, including, without limitation, the Company's future growth potential, results of operations, future cash flows, ability to monetize assets, the future performance and business prospects and opportunities of the Company and the regulatory environment and economic and market conditions that the Company faces. Shareholders should not place undue reliance on such forward-looking information, which is not a guarantee that any particular outcome, event, result, performance or other achievement will occur. Many risks, uncertainties and other factors could cause the actual outcomes, events, results, performance or achievements expressed or implied by such forward-looking information to vary materially from those described herein should any of those risks, uncertainties or other factors materialize. Such risks, uncertainties and other factors include, without limitation, the impact of legislative, regulatory, competitive and technological changes; the state of the economy; credit and equity markets; availability of credit and other financing; the financial markets in general; the ability of the Company to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners following the election of the Horizon Nominees; and all other risks and uncertainties detailed in the Company's' filings with applicable Canadian securities commissions, copies of which are available on SEDAR at www.sedar.com. Accordingly, readers of this news release are cautioned not to place undue reliance on any forward-looking information contained in this herein. All forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. All forward-looking information contained herein is made as of July 20, 2015 and Horizon undertakes no obligation to publicly update or revise any such forward-looking information, except as required by law.
SOURCE Horizon Capital Management Inc.