CALGARY – Advisory firm Glass Lewis says the proposed hostile takeover of Bonterra Energy Corp. would be good for Obsidian Energy Ltd. shareholders but it has “almost no practical likelihood of being successful.”
It recommends investors follow management’s advice and vote next Monday to approve issuing about 72.3 million new shares to buy Bonterra, noting a completed deal would create a company with a stronger balance sheet and the ability to grow through acquisitions.
In a news release on Monday, Obsidian noted Glass Lewis’s support but failed to mention its assessment of the deal’s slim chances, which Glass Lewis attributes to opposition by the Bonterra board and from more than 30 per cent of Bonterra shareholders.
The takeover first proposed in August offers two Obsidian shares for each Bonterra share. It requires approval by holders of more than two-thirds of Bonterra’s stock to be successful.
Meanwhile, Bonterra, which has dubbed the Obsidian offer a “take-under bid” based on relative stock prices, maintained its opposition to the deal on Monday, pointing out its enhanced financial strength thanks to recent lending commitments from the Business Development Bank of Canada and Export Development Canada.
Bonterra shares closed at 1.58 on Monday, more than 3.8 times the value of Obsidian shares, which closed at 41 cents.
“While we have some skepticism regarding (Obsidian)’s ability to complete the offer, we recognize that the current proposed terms are at least rather favourable to the company, and to the extent the company is able to complete the combination on such terms, we believe the company’s shareholders would stand to greatly benefit,” said Glass Lewis in its report. 29dk2902l