Sweeping aside a competing friendly bid for Savanna Energy Services by Western Energy Services, Total Energy Services appears to have succeeded in its hostile takeover of Savanna, setting the stage for a combined entity that will be Canada’s second-largest driller.
Over the last approximately two and a half weeks since Savanna and Western announced their proposed transaction, Total has progressively acquired more and more of Savanna’s outstanding shares, ultimately reaching a majority 51.6 percent last week.
"On the acquisition of over 50 percent of the outstanding Savanna shares, an event of default occurs under Savanna's first and second lien credit facilities," Savanna said in a statement on Monday.
"Savanna is in discussions with its lenders with respect to the impact of the event of default and expects the lenders will not immediately take steps with respect to the default."
Under Canadian Securities law, Total has extended its takeover bid for another 10 days, until April 7, to allow Savanna shareholders to tender to its offer.
“We expect there will be pretty solid support for the Total/Savanna combination now that we’re the largest majority shareholder,” Total CEO Daniel Halyk told JWN.
Western and its board of directors are “understandably disappointed with the outcome” of the bid, the company said in a press release.
Total’s unsolicited acquisition of Savanna has seen its share of drama since the company announced its bid intention on Nov. 23, 2016. It twice raised its offer while fending off the competing friendly bid, while Savanna's management and board reiterated its support for the "superior" Western offer and “unanimous rejection” of Total’s offer.
Numerous statements have been made on both sides, including Total being referred to as “increasingly petulant,” and concerns raised about the company’s ability to run the business, which Total says are unfounded.
Total on the other hand said that a Western/Savanna combination would be highly indebted and questioned the track record of both companies’ management groups.
“At times, it got...entertaining,” Halyk concedes.
He also expressed a measure of frustration with what he referred to as “fake news” around Western Energy’s seemingly generous bid for Savanna, offering 0.85 of a Western common share and payment of $0.21 cash for each Savanna common share.
“What Savanna shareholders get when they tender to our offer is 0.13 of a Total share, plus 20 cents cash. The big, sophisticated Savanna shareholders get it. That's why a majority tendered to our offer. What’s unfortunate is that ‘fake news’ confuses retail shareholders who don’t have the sophistication or advice that these big firms do,” Halyk said.
He added that he plans to contact Savanna in order to initiate “cooperative and constructive engagement.”
“It’s in everyone’s interest for Savanna to engage with us and make the integration smooth and efficient and as quick as possible,” he said.
“I’ve spoken to a lot of directors and officers of Savanna and I can tell you that the general sense is that they are excited about this. We have a strong company. We have a rock-solid balance sheet. It’s good for both companies. The industry needs to consolidate. We had to push it unfortunately, but we’re excited about the future.”