VETRA Increases All Cash Offer for Suroco Energy Inc. to $0.72 per Common Share, Removes Conditions and Exposes Management's Failures

  • VETRA increases its offer to $0.72 per Common Share
  • Removes all but four conditions to its offer
  • Commits to extend the offer if 50.1% condition is met
  • Exposes management's failures and conflicts of interest
  • Urges shareholders to vote their BLUE proxy

CALGARY, June 18, 2014 /CNW/ - Vetra Acquisition Ltd. ("VETRA"), a wholly-owned subsidiary of VETRA Holding S.a.r.l., today commenced mailing of a letter to shareholders of Suroco Energy Inc. ("Suroco"), accompanied by a Notice of Variation, disclosing that it has increased the price of its offer to purchase all of the common shares of Suroco and addressed concerns raised by Suroco.  The letter and Notice of Variation are available at www.sedar.com.  The full text of VETRA's letter to shareholders is as follows:

June 18, 2014

Dear Suroco Shareholders:

On June 25, 2014, you have a decision to make.  VETRA has taken steps to make the choice very clear by increasing the price and certainty of the offer.  VETRA has amended its offer to provide Suroco shareholders with the following significant benefits:

Increased Offer Price

  • VETRA has increased its all-cash offer to $0.72 per common share of Suroco, as opposed to the Petroamerica Arrangement, which provides no cash consideration and no relief from the uncertainty of holding shares in an illiquid small-cap company with a volatile price history.  $0.72 per common share represents a premium of 8.9% to Petroamerica's all-share offer based on the closing price of Petroamerica on June 17, 2014, and 33.9% to the trading price of Suroco shares based on the volume-weighted-average-trading price since the announcement of the Petroamerica offer on April 28, 2014.

Increased Certainty

  • VETRA has amended its offer to remove all but four conditions to the take-up of Suroco shares so that VETRA has significantly fewer conditions than the over 30 conditions included in the Petroamerica Arrangement.

  • The only conditions to VETRA's all-cash offer are:

    1. the Petroamerica Arrangement does not proceed
    2. 50.1% of Suroco shares are deposited and not withdrawn under the offer
    3. substantially the same "No Material Adverse Change" condition as contained in the Petroamerica Arrangement
    4. substantially the same "No Litigation" condition as contained as contained in the Petroamerica Arrangement

Our Commitment

Our removal of substantially all of the conditions to our offer should make it even more clear that VETRA is committed, as it has always been, to completing the acquisition of Suroco.  Our offer presents a true alternative to the Petroamerica Arrangement, which is the only deal the Suroco Board and management pursued and want you to consider. 

For the avoidance of any doubt, if our offer is successful, VETRA will take steps to allow Suroco to meet its obligations under its outstanding financing facility, regardless of whether the lender elects to waive any change of control repayment obligations.  VETRA will also take steps to allow Suroco to satisfy any and all termination fee obligations to Petroamerica, which obligation does not impact the price per share to be received by the Suroco shareholders pursuant to the VETRA offer.

Also, as we have communicated to Suroco shareholders, it is our intention to purchase the entire company.  In that regard and to ensure that all Suroco shareholders have an opportunity to participate in our enhanced offer, VETRA has amended its offer to commit to extending our offer for an additional  period of at least 10 days beginning immediately after VETRA accepts for payment all of the Suroco shares deposited to our offer. 

Suroco's Board and Management are conflicted and have failed Suroco shareholders

The Suroco Board and management are pushing you toward the deal they personally favour because it is the best deal for management, not for shareholders.  The Suroco Board has failed in its duty to shareholders by not taking customary steps to ensure maximum value is paid for Suroco. Below outlines just a few of these failures:

  • No Auction Process – Suroco signed a deal with the first party who came along with a good deal for management and did not try to extract additional value for shareholders from anyone, including from VETRA, a credible party known by Suroco management to have strong financial backing and that clearly demonstrated a strong willingness, capability and commitment to transact.
  • Excessive Break Fee – Not only did the Suroco Board not take customary steps to try to ensure maximum value is paid for Suroco, the Suroco Board agreed to an excessive break fee payable to Petroamerica that discourages other parties from making a topping bid or that diverts value that could have otherwise been available to Suroco shareholders.
  • Governance Failure – ISS Proxy Advisory Services published a report that points out that the Suroco Board failed to establish a special committee of independent directors.  This is very unusual where management has a vested interest in completing the Petroamerica transaction as opposed to a transaction with VETRA.
  • Abusive Voting Mechanics – Suroco has taken a number of highly inappropriate steps to disenfranchise shareholders who oppose the Petroamerica transaction.  Suroco shareholders who vote against the Petroamerica Arrangement lose their right to dissent and seek fair value for their shares.  This is highly unusual and abusive to shareholders.  In addition, Suroco seeks to have the TSXV waive the normally applicable voting rules in order to include a 16% related shareholder that is receiving collateral benefits from the Petroamerica Arrangement in the minority vote despite the fact that its interests are not aligned with minority shareholders.  

We urge Suroco shareholders to stand against this unfair treatment by the Suroco Board. Shareholders should demand a full and open auction.  To get that, you need to vote AGAINST the Petroamerica arrangement. 

If you don't vote against the Petroamerica Arrangement on June 25, 2014, you will not have the opportunity to accept our all-cash offer.

We encourage shareholders to vote their  BLUE proxy AGAINST the Petroamerica Arrangement, no later than 12:00 p.m. (Calgary time) on Friday June 20, 2014.

For more information or assistance in voting your BLUE proxy, please contact Kingsdale Shareholder Services at 1-855-682-8087 (toll-free), 416-867-2272 (outside North America), or by email at contactus@kingsdaleshareholder.com 

Sincerely,

VETRA ACQUISITION LTD.

By: /s/ Martin Diaz Plata,
Name: Martin Diaz Plata
Title: Director and President

By: /s/ José Miguel Knoell
Name: José Miguel Knoell
Title: Director and CEO

TIME IS OF THE ESSENCE.  VOTE YOUR BLUE PROXY AGAINST THE PETROAMERICA ARRANGEMENT BEFORE JUNE 20, 2014

If the Petroamerica Arrangement is approved and the arrangement proceeds, Suroco shareholders will not have the opportunity to accept the Offer. The solicitation of proxies to vote AGAINST the Petroamerica Arrangement is being made by VETRA and not by or on behalf of management or Suroco.

Send in your Suroco shares with a completed YELLOW Letter of Transmittal that will be mailed to you to Kingsdale Shareholder Services, the information agent and depositary or call your broker now to deposit.  If you have already submitted a management form of proxy in connection with the Petroamerica Arrangement, revoke that proxy by completing and submitting the BLUE proxy that you will receive in the mail to the information agent and depositary by 12:00 Noon (Calgary time) on June 20, 2014.

A registered holder of common shares of Suroco that gives a proxy may revoke it: (a) by completing and signing a valid proxy bearing a later date and returning it in accordance with the instructions contained in the BLUE proxy to be provided by VETRA, or as otherwise provided in the offer, take-over bid circular and proxy circular supplement, once made available to shareholders; (b) by depositing an instrument in writing executed by the shareholder or by the shareholder's attorney authorized in writing, as the case may be: (i) at the registered office of Suroco at any time up to and including the last business day preceding the day Suroco's shareholders meeting or any adjournment or postponement of the meeting is to be held, or (ii) with the chairman of the meeting prior to its commencement on the day of the meeting or any adjournment or postponement of the meeting; or (c) in any other manner permitted by law.

A non-registered holder of common shares of Suroco will be entitled to revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the non-registered holder by its intermediary. It should be noted that revocation of proxies or voting instructions by a non-registered holder can take several days or even longer to complete and, accordingly, any such revocation should be completed well in advance of the deadline prescribed in the form of proxy or voting instruction form to ensure it is given effect in respect of the meeting.

Further details concerning the Offer will be included in the advertisement, formal offer, take-over bid circular and proxy circular supplement.  The Offer will be open for at least 35 days following its commencement.  VETRA expects to mail the formal offer, take-over bid circular and proxy circular supplement and related documents in the coming days.

Proxy Voting Instructions

Regardless of how many Suroco shares you own, it is important you vote your BLUE proxy. Even if you have already voted your shares in favour of the Petroamerica Arrangement using the Suroco form of proxy, you can still change your vote by voting the BLUE proxy, as only the latest dated proxy will be counted at the meeting.

We encourage shareholders to vote the control number found on your BLUE proxy AGAINST the Petroamerica Arrangement, no later than 12:00 p.m. (Calgary time) on Friday June 20, 2014.

For more information or assistance in voting your BLUE proxy, please contact Kingsdale Shareholder Services at 1-855-682-8087 (toll-free), 416-867-2272 (outside North America), or by email at contactus@kingsdaleshareholder.com 

Advisors

FirstEnergy Capital Corp. is acting as financial advisor to VETRA in connection with the proposed take-over offer, Goodmans LLP as VETRA's Canadian legal counsel and Debevoise & Plimpton LLP as VETRA's U.S. counsel.

About VETRA

The offeror is Vetra Acquisition Ltd., a wholly-owned subsidiary of VETRA Holding S.a.r.l., a holding company whose primary operating subsidiary is Vetra Exploración y Producción Colombia, S.A.S., a multinational company engaged in the business of exploration, extraction and production of hydrocarbons, primarily in Colombia and Peru. Neither VETRA nor any of its and its associates or affiliates own any shares of Suroco.

About Suroco

Suroco is focused on the identification and evaluation of opportunities for the acquisition of interests in oil and gas properties, corporations, assets or businesses, primarily in Colombia, and once identified and evaluated, negotiating acquisitions thereof or participation therein. Suroco is a public corporation that is listed on the TSXV under the symbol "SRN" and its public filings are available on www.sedar.com.

Suroco's registered office is at Suite 1600, 421 – 7th Avenue, S.W., Calgary, Alberta, T2P 4K9 and its principal business office is at Suite 810, 940 – 6th Avenue S.W., Calgary, Alberta, T2P 3T1.

Cautionary Statements

This press release contains 'forward looking statements" and "forward looking information" (collectively, "forward looking information") within the meaning of applicable Canadian securities legislation. All information contained in this press release, other than statements of current and historical fact, is forward looking information. Often, but not always, forward looking information can be identified by the use of words such as "plans", "expects", "budget", "guidance", "scheduled", "estimates", "forecasts", "strategy", "target", "intends", "objective", "goal", "understands", "anticipates" and "believes" (and variations of these or similar words) and statements that certain actions, events or results "may", "could", "would", "should", "might" "occur" or "be achieved" or "will be taken" (and variations of these or similar expressions). All of the forward looking information in this press release, is qualified by this cautionary note.

VETRA has no intention to update this forward looking information, except as required by applicable securities law.  This forward looking information should not be relied upon as representing VETRA's views as of any date subsequent to the date of this press release.

Except as otherwise expressly indicated herein, the information concerning Suroco and Petroamerica contained in this press release has been taken from and is based solely upon their respective public disclosure, including disclosure on file with the Canadian securities regulatory authorities.  Neither VETRA nor any of its directors or officers has verified, nor do they assume any responsibility for, the accuracy or completeness of such information or statements or for any failure by Suroco or Petroamerica to disclose events or facts that may have occurred or that may affect the significance or accuracy of any such information or statements but that are unknown to VETRA.

Contacts

Suroco shareholders with questions about the Offer and how to vote AGAINST the Petroamerica Arrangement and deposit shares to the Offer, should contact VETRA's information agent and depository, Kingsdale Shareholder Services, toll-free within North America: 1-855-682-8087 or Call Collect: 416-867-2272, by fax: 416-867-2271 or 1-866-545-558 or e-mail: contactus@kingsdaleshareholder.com

SOURCE Vetra Acquisition Ltd.

For further information: Media Inquiries:Kingsdale Shareholder Services, 416-867-2357