Velvet’s Predatory Offer Significantly Undervalues Iron Bridge Shareholders’ Investment
Offer Transfers Substantial Upside from Gold Creek Oil-Rich Montney Play to Velvet, at the Expense of Iron Bridge Shareholders
Iron Bridge’s Growth Outlook is Strong, Its Asset is Highly Economic, It has Access to Capital and It is Stewarded by an Experienced Management Team to Execute on Value Creation
White Knight and Strategic Capital Partners Are Already Emerging; a Superior Alternative Could Surface
CALGARY, Alberta–(BUSINESS WIRE)–#IronBridge–Iron Bridge Resources Inc. (“Iron Bridge”, “IBR” or the “Company”) (TSX:IBR) today announced that its Board of Directors (the “Iron Bridge Board” or “Board”), based upon the recommendation of its independent Special Committee, unanimously recommends that IBR shareholders REJECT the unsolicited offer from Velvet Energy Ltd. (“Velvet Energy” or “Velvet”) to acquire all of the issued and outstanding common shares of IBR (“Common Shares”) at a price of $0.75 per Common Share in cash (the “Offer”).
As described in the Letter to Shareholders and Directors’ Circular filed today by the Company, the Iron Bridge Board carefully reviewed and considered the terms and conditions of the Offer, with the assistance of its legal and financial advisors. On the basis of multiple factors, including an inadequacy opinion received from Cormark Securities Inc., its independent financial advisor, the Board has unanimously concluded that the Offer is not in the best interests of Iron Bridge shareholders.
The Company has the support of its largest shareholders in rejecting the Offer. IBR shareholders who together own approximately 36% of the outstanding Common Shares, including the Company’s two largest institutional shareholders, have indicated that they will not tender their Common Shares in response to the Velvet Offer.
Commenting on Velvet’s Offer, Josh Young, non-executive Chairman of Iron Bridge, said, “The Board has determined that Velvet Energy’s predatory and conditional offer with its meagre premium substantially undervalues Iron Bridge and is not in the best interest of our shareholders. This cash take-over proposal would transfer all of the upside from our premium Montney asset to Velvet Energy at the expense of Iron Bridge shareholders. With a world-class asset, a strong development plan, access to growth capital and a veteran management team, Iron Bridge is poised to deliver superior long-term shareholder returns and considerable value appreciation over the next 12 to 18 months, which is why we strongly recommend shareholders reject what is essentially a ‘smash and grab’ effort by Velvet Energy. Potential white knight and strategic capital partners have already emerged – a superior alternative could surface.”
The Board’s recommendation to IBR shareholders is that they REJECT the Offer and DO NOT TENDER their Common Shares. If shareholders have tendered their Common Shares in error and wish to WITHDRAW, they simply need to ask their broker or Evolution Proxy, Inc. (contact information below) for assistance with this process. A more detailed discussion of the reasons for rejecting the unsolicited Offer and the inadequacy opinion provided by Cormark Securities Inc. is contained in the Directors’ Circular that is to be mailed to each of Iron Bridge’s shareholders and filed with Canadian Securities regulatory authorities. The Directors’ Circular will also be made available on SEDAR (www.sedar.com) and on the Company’s website (www.ironbridgeres.com).
The full text of the Board’s letter to Iron Bridge shareholders follows:
Reject Velvet’s Hostile Offer: It Significantly Undervalues Your Investment in Iron Bridge
June 13, 2018
Dear Fellow Shareholder,
The Board of Directors (the “Board”) of Iron Bridge Resources Inc. (“Iron Bridge” or the “Company”) believes your Company is well positioned to deliver superior, long-term Shareholder returns. Against this backdrop, Velvet Energy Ltd. (“Velvet” or the “Offeror”) has launched an unsolicited, hostile offer to acquire Iron Bridge (the “Offer”). Velvet’s Offer significantly undervalues your investment in Iron Bridge. The all-cash Offer will only ensure that Velvet, not you, receives all future upside from Iron Bridge’s assets.
Velvet has demonstrated that it has no interest in negotiating a transaction and it commenced its tender offer in the hopes of trying to grab Iron Bridge cheaply. While the Company’s highly sought-after, oily Montney acreage represents a key impediment to Velvet’s development plans, the Offer would benefit only Velvet and its private equity backers without sharing any benefit with shareholders of Iron Bridge (“Iron Bridge Shareholders” or “Shareholders”). Your Board has undertaken a full review of Velvet’s hostile Offer. With the assistance of independent external financial and legal advisors, the Board has determined that the Offer significantly undervalues the Company and recommends that Shareholders REJECT Velvet’s Offer. To reject the Offer, simply take no action and discard any materials received from Velvet.
Velvet’s Offer is Flawed and Significantly Undervalues Your Investment in Iron Bridge
Iron Bridge Shareholders have weathered a challenging, industry-wide downturn, and, in the last 10 months, a significant restructuring of the business. Iron Bridge is now well-positioned with the right assets and the right team to benefit from the cyclical recovery of the oil and gas sector. The Velvet Offer does not recognize the current value of Iron Bridge, strips Shareholders of the substantial, near-term upside of the Company’s assets and provides no premium for the synergies Velvet would claim from combining the lands, as demonstrated by:
Management Has a Viable Plan to Generate Substantial Value for Shareholders
Contrary to Velvet’s misrepresentations, Iron Bridge’s long-term financial and operational prospects are strong. The Company is well positioned to realize significant value for Shareholders from the development of its large, 77.5 net section land block in the oil-rich window of the Gold Creek Montney formation, which management estimates to contain 3.2 billion barrels of unrisked original-oil-in-place (“OOIP”) and 2.7 trillion cubic feet of original-gas-in-place (“OGIP”):
Velvet Energy is a Private-Equity-Vehicle Using Aggressive, Questionable Tactics to Obtain Your Shares
Velvet is primarily backed by private-equity investors who are no doubt attracted to the significant upside and critical mass that Iron Bridge offers. Velvet likely also recognizes that, without this acquisition, its own land holdings present substantial development challenges. Rather than negotiating a mutually beneficial transaction, Velvet chose to launch a hostile bid while Iron Bridge’s stock price was weak. Despite the Company’s willingness to enter into exclusive discussions, Velvet even refused to accept a customary, but short, three-day standstill proposal to do so. Velvet has demonstrated no interest in engaging in beneficial mutual negotiations.
These aggressive maneuvers were mirrored by its shocking actions on the legal front. Velvet’s law firm, Bennett Jones LLP, was retained by the Iron Bridge Board only 12 months ago to provide advice on an earlier approach by Velvet to acquire Iron Bridge. At that time, the law firm had access to confidential and commercially sensitive information. The same partner who previously advised the Board is now the lead legal advisor for the hostile Offer. Iron Bridge is considering its legal options regarding this severe conflict of interest and potential disclosure and misuse of Iron Bridge confidential information to Velvet, enabling Velvet to make the Offer.
A Large Percentage of Iron Bridge Shareholders Have Already Rejected the Velvet Offer
Shareholders with a total ownership interest of approximately 30% of the shares outstanding, including insiders and the two largest institutional Shareholders, have voiced considerable support for the Board’s recommendation and have declared their intention to reject the Offer. Further, since Velvet has formally commenced the Offer, additional Shareholder groups representing approximately 6% of the total common shares outstanding have provided similar support. Thus, Shareholders representing a combined approximately 36% of the common shares outstanding support the Board’s view that Iron Bridge is capable and well positioned to realize considerable value appreciation over the next 12 to 18 months.
The Board of Directors of Iron Bridge unanimously recommends that you REJECT the Offer and DO NOT TENDER your common shares. To reject the Offer, simply TAKE NO ACTION.
Please read the accompanying Directors’ Circular in its entirety. It details the 17 principal reasons we believe Shareholders should REJECT Velvet’s low-premium Offer, and it provides the complete background to Velvet’s Offer, including significant facts that the Velvet circular omitted or mischaracterized.
If you have tendered your shares in error and wish to WITHDRAW, simply ask your broker or Evolution Proxy, Inc. (see contact information below) to assist you with this process.
Thank you for your consideration and for your support.
Sincerely,
“Josh Young” | “Rob Colcleugh” | |||
Josh Young | Rob Colcleugh | |||
Chairman of the Board | Chief Executive Officer | |||
Iron Bridge Resources Inc. | Iron Bridge Resources Inc. | |||
How to Withdraw Tendered Common Shares
To reject the unsolicited Offer, you should do nothing. Shareholders who have already tendered their Common Shares to the unsolicited Offer can withdraw them at any time before they have been taken up and accepted for payment by Velvet Energy. Shareholders holding shares through a dealer, broker or other nominee should contact such dealer, broker or nominee to withdraw their Iron Bridge Common Shares.