Headwater will issue 50 million Common Shares and 15 million warrants (the “Warrants“) to purchase Common Shares exercisable at $2.00 per Common Share with a three-year term to Cenovus as a portion of the consideration for the acquisition of the assets under the Transaction. As a result, on closing of the Transaction Cenovus will own or control, directly or indirectly, approximately 26% of the issued and outstanding Common Shares (assuming no Warrants are exercised) and approximately 31% of the issued and outstanding Common Shares (assuming all Warrants are fully exercised).
In accordance with the policies of the Toronto Stock Exchange (the “TSX“), the approval of Headwater shareholders is required for the Transaction as it will result in the issuance of greater than 25% of the issued and outstanding Common Shares and Cenovus owning or controlling, directly or indirectly, greater than 20% of the issued and outstanding Common Shares on completion of the Transaction. Headwater has now received written consents from Headwater shareholders holding in excess of 60% of the issued and outstanding Common Shares indicating that such shareholders consent to, and approve, the Transaction, including the issuance of the Common Shares and Warrants to Cenovus. As a result, Headwater will not be required to hold the special meeting of its shareholders that it intended to hold on December 21, 2020.
Pursuant to the written consent, Headwater shareholders also consented to and approved the use of the twenty day volume weighted average trading price instead of TSX’s prescribed five day volume weighted average trading price for various provisions in the Warrants including, in certain circumstances, for the “cashless” exercise of the Warrants. The TSX has accepted the written consents as evidence of shareholder approval for the Transaction subject to meeting certain conditions, including that the parties wait a minimum of five business days from the date of this press release to close the Transaction.
Headwater and Cenovus have made the necessary filings with the Competition Bureau under the Competition Act (Canada) with respect to the Transaction and, assuming the Competition Bureau treats the Transaction as a “non-complex” transaction, it is anticipated that the required approval will be received on or about November 30, 2020. Following receipt of the Competition Act approval, the parties intend to work expeditiously towards closing the Transaction and anticipate closing the Transaction on or about December 2, 2020.
For additional information relating to the Transaction see Headwater’s press release dated November 9, 2020, which is available on SEDAR at www.sedar.com.