CALGARY, ALBERTA–(Marketwired – Feb. 24, 2016) – BOULDER ENERGY LTD. (“Boulder” or the “Company“) (TSX:BXO)(OTCQX:BLLDF) is pleased to announce that it has entered into a definitive arrangement agreement (the “Arrangement Agreement“), pursuant to which a newly formed portfolio company (“ARC AcquisitionCo“) of ARC Energy Fund 8 will acquire all of the issued and outstanding common shares of Boulder (“Boulder Shares“) for cash consideration of $2.59 per share (the “Transaction“). ARC Energy Fund 8 is a private equity fund raised and advised by ARC Financial Corp. (“ARC“).
The Transaction offers Boulder shareholders full liquidity at a substantial premium to current and recent trading prices. The cash consideration of $2.59 per share represents a 70% premium to the closing price for the Boulder Shares on February 24, 2016 and a 96% premium to the volume-weighted average trading price over the last 30 days on the Toronto Stock Exchange. The Transaction implies a value of approximately $268 million for Boulder after taking into account the assumption of Boulder’s net debt of approximately $143 million and estimated transaction costs. The Company’s estimated average production for January 2016 was approximately 5,600 boe/d.
The board of directors of Boulder (the “Board“) formed a committee of independent directors (the “Special Committee“) to, among other things, review and evaluate the terms of the proposal from ARC, review and consider alternatives to the Transaction, including the potential to refinance Boulder’s bank debt and, to negotiate the terms and conditions of the Transaction and to make a recommendation to the Board in respect of the Transaction and other related matters.
Cormark Securities Inc., the financial advisor to the Special Committee, has provided its verbal opinion that, subject to the review of the final form of the documents effecting the Transaction, the consideration to be received by holders of Boulder Shares (the “Shareholders“) pursuant to the Transaction is fair, from a financial point of view, to such holders (the “Fairness Opinion“).
Following an extensive review and analysis of the Transaction and the consideration of other available alternatives, the Fairness Opinion and the recommendations of the Special Committee, the Board, after consulting with its financial and legal advisors, unanimously determined that the consideration to be received by Boulder’s Shareholders pursuant to the Transaction is fair to such holders and that the Transaction is in the best interests of Boulder. The Board has approved the terms of the Transaction and unanimously recommends that all Boulder Shareholders vote in favour of the Transaction at the special Shareholders’ meeting to be called to consider the Transaction (the “Special Meeting“).
All of the members of the Board and officers of Boulder and a large shareholder, who collectively own approximately 24.8% of the outstanding Boulder Shares, have entered into voting support agreements pursuant to which they have agreed to vote their Boulder Shares in favour of the Transaction, subject to the provisions thereof, at the Special Meeting.
Certain members of senior management of Boulder have agreed to roll-over a portion or all of their Boulder Shares into equity in ARC AcquisitionCo (the “Management Participants“). The number of Boulder Shares expected to roll-over is less than 2% of the Boulder Shares outstanding. No change in control or severance payments are being offered or paid to the Management Participants, with existing employment contracts being rolled forward unchanged.
The Plan of Arrangement and Approvals
The Transaction will be carried out by way of plan of arrangement under the Business Corporations Act (Alberta) (the “Plan of Arrangement“). Pursuant to the Plan of Arrangement, each Shareholder, other than the Management Participants, will receive $2.59 in cash in exchange for each Boulder Share held. All currently outstanding stock options to purchase Boulder Shares will either be surrendered immediately prior to the completion of the Transaction for a cash payment equal to $0.01 for each stock option and subsequently cancelled or be terminated pursuant to the Plan of Arrangement.
The Transaction contains customary deal protection provisions which, among other matters, restrict Boulder from soliciting, assisting, initiating, facilitating or encouraging any discussions, negotiations, proposals or offers concerning alternative acquisition proposals. However, the Transaction permits Boulder to respond to unsolicited written acquisition proposals under certain circumstances which include where such acquisition proposal constitutes or could reasonably constitute or lead to a “superior proposal” (as defined in the Arrangement Agreement). ARC AcquisitionCo has the right to match any competing proposal for Boulder in the event a superior proposal is made. Boulder has agreed to pay a termination fee of $8.0 million in certain circumstances including where the Transaction is terminated due to a superior proposal. If, under certain circumstances, ARC AcquisitionCo terminates the Transaction, a reverse break fee of $8.0 million is payable to Boulder. The parties have each agreed to a reciprocal expense reimbursement fee of up to $2.0 million payable to the other if the Transaction is not completed in certain circumstances, and where a termination fee or reverse break fee is not otherwise payable.
The Transaction is subject to customary approvals, including, but not limited to, the approval of at least 66 2/3% of the votes cast in person or by proxy at the Special Meeting, and the approval of a “majority of the minority” of the Shareholders being a majority of the votes cast in person or by proxy at the Special Meeting excluding Shareholders whose votes may not be included in determining if minority approval is obtained pursuant to Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions. Closing of the Transaction is also subject to the satisfaction of a number of conditions customary for transactions of this nature. The Special Meeting is expected to be held on or before April 14, 2016. An information circular in connection with the Transaction is expected to be mailed to Boulder Shareholders by March 16, 2016, with closing of the Transaction expected to occur on or about April 15, 2016.
Following closing of the Transaction, the Boulder Shares will be de-listed from the TSX.
A copy of the Arrangement Agreement will be filed on Boulder’s SEDAR profile and will be available for viewing at www.sedar.com.