TORONTO, Sept. 4, 2012 /CNW/ - Sprott Resource Corp. ("SRC" or the "Company") (TSX: SCP) announced today that its subsidiary, Waseca Energy Inc. ("Waseca"), has entered into an arrangement agreement providing for the
acquisition by Twin Butte Energy Ltd. ("Twin Butte") of all of the issued and outstanding common shares of Waseca for
$134.5 million ($127 million on an enterprise value basis) or $1.35 per Waseca
common share (the "Transaction").
The consideration for the Transaction will be comprised of a minimum of
$32.2 million and a maximum of $58.9 million of cash (assuming the
Waseca options and performance shares are arranged in accordance with
the arrangement agreement) and a minimum of 28.9 million and a maximum
of 39.0 million of Twin Butte common shares depending on the elections
between cash and Twin Butte shares made by Waseca shareholders.
SRC owns 73.6 million Waseca common shares (or 81.1% of the undiluted
Waseca common shares outstanding), which it purchased for $44.2 million
($0.60 per Waseca common share). SRC will receive total consideration
of $99.4 million in cash and Twin Butte common shares for its Waseca
common share holdings. On closing of the Transaction, SRC will own
approximately 9% of Twin Butte's common shares outstanding.
Waseca's SAGD Assets
Waseca's SAGD assets (the "SAGD Assets") are not included as part of the Transaction. Such assets will either
be sold prior to October 1, 2012 or conveyed by Waseca to a new
wholly-owned subsidiary of Waseca, the shares of which would be
distributed to Waseca common shareholders on closing of the
Transaction. If the SAGD Assets are sold prior to October 1, 2012, Waseca common
shareholders will be entitled to a special cash distribution of
approximately $10 million on closing of the Transaction ($0.09 per
Waseca common share). The special cash distribution, if made, would
result in additional consideration of $6.6 million to SRC.
"We would like to congratulate the Waseca team for delivering an
exceptional return on investment to Waseca shareholders over the past
four years, especially relative to the returns experienced by most
Canadian oil and gas companies during this period," said Kevin
Bambrough, President & CEO of SRC.
"We are pleased that Waseca has entered into the Transaction with Twin
Butte in particular. We believe that Twin Butte's dividend plus growth
business model focused on low-risk, high-return Lloyd heavy oil is
attractive and sustainable."
Transaction Terms and Conditions
The Transaction is to be effected by way of a plan of arrangement under
the Business Corporations Act (Alberta). Completion of the Transaction, which is anticipated to
occur in early November 2012, is subject to, among other things, the
approval of at least 66⅔ percent of the Waseca shareholders voting on
the arrangement, the approval of the Court of Queen's Bench of Alberta,
the receipt of all necessary regulatory and stock exchange approvals,
and certain closing conditions that are customary for a transaction of
The Boards of Directors of each of Twin Butte and Waseca have
unanimously approved the Transaction and Waseca's Board of Directors
has resolved to recommend that its shareholders vote in favour of the
Transaction. Directors, officers and shareholders of Waseca, including
SRC, who collectively hold approximately 81.9 % of the outstanding
Waseca common shares, have entered into support agreements with Twin
Butte pursuant to which each has agreed to vote in favour of the
Waseca has agreed to not solicit or initiate any discussions regarding
any other business combination or sale of material assets and has
granted Twin Butte the right to match competing, unsolicited
proposals. The arrangement agreement provides for a $4.0 million
non-completion fee payable by Waseca in certain circumstances if the
Transaction is not completed.
Complete details of the terms of the Transaction are set out in the
arrangement agreement, which will be filed by SRC and will be available
for viewing at www.sedar.com.
Financial and Legal Advisors Advisors
RBC Capital Markets is acting as financial advisor to Waseca and has
provided the Board of Directors of Waseca with an opinion that the
consideration to be received by the Waseca shareholders pursuant to the
Transaction is fair, from a financial point of view, to Waseca
shareholders. Stikeman Elliott LLP is acting as legal advisor to
Peters & Co. Limited is acting as financial advisor and Raymond James
Ltd. is acting as strategic advisor to Twin Butte. Burnet, Duckworth &
Palmer LLP is acting as legal advisor to Twin Butte.
About Waseca Energy Inc.
Waseca is a private heavy company with 100 percent of its production
being from properties located in the greater Lloydminster area.
About Sprott Resource Corp.
SRC is a Canadian-based company, the primary purpose of which is to
invest and operate in natural resources. Through acquisitions, joint
ventures and other investments, SRC seeks to provide its shareholders
with exposure to the natural resource sector for the purposes of
capital appreciation and real wealth preservation. SRC is well
positioned to draw upon the considerable experience and expertise of
both its Board of Directors and Sprott Consulting Limited Partnership
(SCLP), of which Sprott Inc. is the sole limited partner. Pursuant to
a management services agreement between SCLP and SRC, SCLP provides
day-to-day business management for SRC as well as other management and
administrative services. SRC invests and operates through Sprott
Resource Partnership (SRP), a partnership between SRC and Sprott
Resource Consulting Limited Partnership, an affiliate of SCLP which is
the managing partner of SRP.
Forward-looking information and statements
This news release contains certain forward-looking information and
statements within the meaning of applicable securities laws. The use of
any of the words "expect", "anticipate", "continue", "estimate", "may",
"will", "project", "should", "believe", "plans", "intends" and similar
expressions are intended to identify forward-looking information or
statements. In particular, but without limiting the forgoing, this news
release contains forward-looking information and statements pertaining
to the Transaction and its possible completion and the possible sale of
the SAGD Assets. Forward-looking statements or information are based
on a number of material factors, expectations or assumptions which have
been used to develop such statements and information but which may
prove to be incorrect, including the assumption that the Transaction
will be completed. Although SRC believes the expectations reflected in
such forward-looking statements or information are reasonable, undue
reliance should not be placed on forward-looking statements because SRC
can give no assurance that such expectations will prove to be correct.
The forward-looking information and statements included in this news
release are not guarantees of future performance and should not be
unduly relied upon. Such information and statement, including the
assumptions made in respect thereof, involve known and unknown risks,
uncertainties and other factors, including the possibility that the
Transaction will not close due to a failure to receive all necessary
approvals or meet closing conditions, which may cause actual results or
events to defer materially from those anticipated in such
forward-looking information or statements.
The forward-looking information and statements contained in this news
release speak only as of the date of this news release, and SRC does
not assume any obligation to publicly update or revise any of the
included forward-looking statements or information, whether as a result
of new information, future events or otherwise, except as may be
expressly required by applicable securities laws.
SOURCE: Sprott Resource Corp.
For further information:
Chief Financial Officer
Sprott Resource Corp.
200 Bay Street, Suite 2750
Tel: (416) 977-7333
Fax: (416) 977-9555