Element is a privately held entity that has fracturing and coiled tubing operations in western
Strategic Rationale - Attractive Value for Essential Shareholders
The Consideration implies an enterprise value for Essential of approximately
All Cash Premium to Market Trading Price
The Consideration represents a premium of approximately 12% to Essential's 20-day volume weighted average trading price on the
The Amalgamation Agreement and Approvals
Element will, among other things, through 2544592
The Company will seek approval of the Amalgamation by the Essential Shareholders at a special meeting expected to be held on or about
Upon closing of the Amalgamation, it is expected that the Essential Shares will be de-listed from the TSX and Amalco will apply to cease to be a reporting issuer under applicable securities laws. The Amalgamation is subject to various closing conditions, including the required Essential Shareholder approvals at the Special Meeting, the approval of the TSX and certain regulatory and other approvals customary in transactions of this nature.
The Amalgamation Agreement contains customary representations and warranties of each party and interim operational covenants of Essential. The Amalgamation Agreement also provides for, among other things, customary board support and non-solicitation covenants, subject to a 'fiduciary out' for unsolicited 'superior proposals' in favor of Essential and a provision for the right to match superior proposals in favor of Element.
The Amalgamation Agreement provides for a non-completion fee of
All of the directors and executive officers of Essential, representing approximately 3.1% of the issued and outstanding Essential Shares, have entered into support agreements pursuant to which they have agreed to vote such Essential Shares in favor of the Amalgamation, subject to the provisions of such support agreements.
Further details with respect to the Amalgamation will be included in the information circular to be mailed to Essential Shareholders in connection with the Special Meeting. The Special Meeting is expected to be held on or around
Recommendation of the Essential Board
Through discussions with the Company's financial and legal advisors, and after considering the Fairness Opinion (as defined below), Essential's board of directors has unanimously determined: (i) that the transactions contemplated by the Amalgamation Agreement are in the best interests of Essential and (ii) to recommend that Essential Shareholders vote in favor of the Amalgamation.
Advisors
FORWARD-LOOKING ADVISORY
This news release contains 'forward-looking statements' and 'forward-looking information' (collectively referred to herein as 'forward-looking statements') within the meaning of applicable securities legislation. Such forward-looking statements include, without limitation, expectations and objectives for future operations that are subject to a number of material factors, assumptions, risks and uncertainties, many of which are beyond the control of the Company.
Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words 'anticipates', 'believes', 'expects' and similar expressions or are events or conditions that 'will' occur or be achieved. This news release contains forward-looking statements pertaining to, among other things, the following: the benefits of the Amalgamation to Essential's shareholders and customers; Amalco, including its status as a reporting issuer following completion of the Amalgamation; the Amalgamation and the timing thereof; the Consideration; the issuance and redemption of the Amalco Redeemable Preferred Shares and the timing thereof; the Special Meeting and the timing thereof; the mailing and filing on SEDAR+ of the information circular and the de-listing of the Essential Shares from the TSX following the completion of the Amalgamation.
The forward-looking statements contained in this news release reflect several material factors and expectations and assumptions of Essential including, without limitation: the ability of the parties to receive, in a timely manner, the necessary regulatory, securityholder, stock exchange and other third-party approvals; the ability of Essential and Element to satisfy, in a timely manner, the other conditions to the closing of the Amalgamation; the ability to complete the Amalgamation on the terms contemplated by the Amalgamation Agreement, or at all; that Essential will continue to conduct its operations in a manner consistent with past operations and the general continuance of current or, where applicable, assumed industry conditions.
Although the Company believes that the material factors, expectations and assumptions expressed in such forward-looking statements are reasonable based on information available to it on the date such statements are made, undue reliance should not be placed on the forward-looking statements because the Company can give no assurances that such statements and information will prove to be correct and such statements are not guarantees of future performance. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties.
Actual performance and results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, known and unknown risks, including: the completion and the timing of the Amalgamation; the ability of Essential and Element to receive, in a timely manner, the necessary regulatory, securityholder, stock exchange and other third-party approvals; the ability of Essential and Element to satisfy, in a timely manner, the other conditions to the closing of the Amalgamation; interloper risk; the ability to complete the Amalgamation on the terms contemplated by the Amalgamation Agreement, or at all; the consequences of not completing the Amalgamation, including the volatility of the share price of Essential, negative reactions from the investment community and the required payment of certain costs related to the Amalgamation; actions taken by government entities or others seeking to prevent or alter the terms of the Amalgamation; potential undisclosed liabilities unidentified during the due diligence process; the focus of management's time and attention on the Amalgamation and other disruptions arising from the Amalgamation; general economic, market or business conditions including those in the event of an epidemic, natural disaster or other event; global economic events; changes to Essential's financial position and cash flow and the uncertainty related to the estimates and judgements made in the preparation of financial statements; potential industry developments and other unforeseen conditions which could impact the use of services supplied by the Company. Accordingly, readers should not place undue importance or reliance on the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive and should refer to the 'Risk Factors' section set out in the Company's most recent annual information form (a copy of which can be found under Essential's profile on SEDAR+ at www.sedarplus.ca).
Statements, including forward-looking statements, contained in this news release are made as of the date they are given and the Company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Additional information on these and other factors that could affect the Company's operations and financial results are included in reports on file with applicable securities regulatory authorities and may be accessed under Essential's profile on SEDAR+ at www.sedarplus.ca.
This announcement does not constitute an offer of securities for sale in
NON-IFRS FINANCIAL MEASURES
Certain specified financial measures in this news release, including 'enterprise value as a multiple of trailing twelve-month EBITDAS', do not have a standardized meaning as prescribed under International Financial Reporting Standards ('IFRS'). These measures should not be used as an alternative to IFRS measures because they may not be comparable to similar financial measures used by other companies.
'Enterprise value as a multiple of trailing twelve-month EBITDAS' is a non-IFRS ratio calculated as enterprise value divided by EBITDAS. 'Enterprise value' is calculated as the sum of (i) Consideration multiplied by the number of Essential Shares issued and outstanding as at
'EBITDAS' is not a standardized financial measure under IFRS and might not be comparable to similar financial measures disclosed by other companies. The most directly comparable IFRS measure for 'EBITDAS' is net loss. 'EBITDAS' is further explained in the 'Non-IFRS and Other Financial Measures' section of the Company's Management's Discussion and Analysis for the quarter ended
ABOUT ESSENTIAL
Essential provides oilfield services to oil and natural gas producers, primarily in western
Contact:
Tel: (403) 513-7272
Email: service@essentialenergy.ca
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