CALGARY, ALBERTA–(Marketwired – Nov. 23, 2016) – Total Energy Services Inc. (“Total” or the “Company“) (TSX:TOT) announced today that it currently intends, subject to various considerations noted below, to make an offer (the “Offer“) to purchase all of the issued and outstanding common shares (the “Savanna Shares“) of Savanna Energy Services Corp. (“Savanna“) for consideration consisting of common shares of Total (the “Total Shares“). Total anticipates that, if the Offer is successful, holders of Savanna Shares will receive, in exchange for each Savanna Share, 0.1132 of a common share of Total.
Readers should note that Total has not yet commenced the Offer and should carefully review the cautionary statements set out below in this News Release respecting the status of the Offer and the factors that may cause Total not to make the Offer. Total has determined to announce its intention to make the Offer at this time in light of the execution and delivery of support agreements with various shareholders of Savanna that, in the aggregate, hold or exercise control or direction over approximately 43% of the total number of issued and outstanding Savanna Shares (calculated on a non-diluted basis and before giving effect to any of the transactions announced by Savanna on November 22, 2016).
In this uncertain and challenging environment, Total believes the terms of the proposed Offer reflect fair value for the Savanna Shares. If the Offer is successfully concluded, Savanna shareholders will receive Total Shares in exchange for their Savanna Shares and will have an opportunity to retain investment exposure to the oilfield services sector (through the ownership of Total Shares).
Provided Total does not uncover or otherwise identify information suggesting that the business, affairs, prospects or assets of Savanna have been materially impaired, Total intends to mail a take-over bid circular to the registered holders of Savanna Shares (as required under applicable Canadian securities laws) on or about December 14, 2016. Total expects that the Offer, when made, will be remain open for acceptance for at least 105 calendar days from the date of mailing of its take-over bid circular.
Readers are cautioned that Total may determine not to make the Offer if: (i) it identifies material adverse information concerning the business, affairs, prospects or assets of Savanna not previously disclosed by Savanna; (ii) Savanna implements or attempts to implement defensive tactics (such as a shareholder rights plan or the grant of an option (or similar right) to purchase material assets) in relation to the Offer; or (iii) Savanna determines to engage with Total to negotiate the terms of a combination transaction and Total and Savanna determine to undertake that transaction utilizing a structure other than a takeover bid (a plan of arrangement, for example). Accordingly, there can be no assurance that the Offer will be made or that the final terms of the Offer will be as set out in this News Release.
Total anticipates that the Offer will be subject to a number of customary conditions, including: (i) there being deposited under the Offer, and not withdrawn, at least 66 2/3% of the outstanding Savanna Shares (calculated on a fully diluted basis), excluding Savanna Shares held by Total; (ii) receipt of all governmental, regulatory and third party approvals that Total considers necessary or desirable in connection with the Offer; and (iii) no material adverse change having occurred in the business, affairs, prospects or assets of Savanna. In addition, Total will require the approval of its shareholders to issue the Total Shares to be distributed by it in connection with the Offer. Total expects that it will call a meeting of its shareholders to consider a resolution to approve the issuance of Total Shares in connection with the Offer in March 2017.
Background to the Proposed Offer
In September 2016 a significant shareholder of Savanna approached Total with the concept of combining Savanna and Total. After completing its preliminary analysis, Total approached Savanna on two occasions in an effort to commence the negotiation of a combination transaction between the two corporations, but Savanna declined to engage. Total has also secured support from significant Savanna shareholders to pursue a business combination transaction.
Reasons for the Proposed Offer
Total Expects That a Combination with Savanna Will Give Rise to Operational Efficiencies:
Total is of the view that current challenging industry conditions and resultant customer expectations require the North American energy services industry to pursue opportunities to achieve material operating synergies and cost efficiencies and believes the combination of Savanna and Total presents a compelling opportunity to achieve meaningful synergies and cost efficiencies. Through the elimination of duplicate public company expenses and consolidation of head office and North American field operations, Total estimates that at least $10 million of annual cost savings can be achieved over time. The combination of Savanna’s and Total’s drilling rig fleets would result in the second largest fleet in Canada and management of Total believes that a combination would give rise to various operational and marketing efficiencies. If the Offer is successful, Total anticipates integrating Savanna’s Canadian oilfield rental business into the Company’s existing Rentals and Transportation Services’ segment, which is expected to provide significant cost synergies. Opportunities to utilize Total’s extensive owned Canadian real estate so as to achieve operating cost synergies in Savanna’s service rig business will also be explored if the Offer is successful.
By leveraging key customer relationships and achieving economies and efficiencies of scale, Total believes the combined business would be better positioned to compete in the current challenging environment and to capitalize on an eventual recovery of the North American energy services industry.
Exposure to a Larger Entity:
The Offer will provide Savanna shareholders with an opportunity to retain equity investment exposure to the oilfield services sector – through an investment in a larger and more diverse North American energy services company with international business activities, including Australia where both Total and Savanna are currently active.
Increased Diversification and Stability:
Management of Total believes the combination of Total and Savanna will provide meaningful business and geographical diversification across several key oil and natural gas basins throughout North America and Australia. If the Offer is successfully concluded, shareholders of Savanna will benefit from the relative stability of Total’s Compression and Process Services segment, which has a leading presence in the Canadian marketplace as well as a growing international business.
Total has retained GMP FirstEnergy as its financial advisor in connection with the Offer. Bennett Jones LLP is acting as Canadian legal advisor to Total.
Total is a growth oriented energy services corporation involved in contract drilling services (Chinook Drilling), rentals and transportation services (Total Oilfield Rentals) and the fabrication, sale, rental and servicing of natural gas compression (Bidell Gas Compression) and process equipment (Spectrum Process Systems).
Total has a proven 20 year track record of industry-leading returns on invested capital and has successfully completed approximately 30 strategic acquisitions since 1997 without ever recording a write-down in respect of such acquisitions. Total’s balance sheet is strong and it has paid a stable dividend to its shareholders throughout the current industry downturn. Directors and Officers of Total are aligned with Total’s shareholders through their meaningful ownership position in Total, which position has been increasing over the past 12 months. The common shares of Total are listed and trade on the TSX under the symbol “TOT”.
The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.
This News Release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.