Alfa Oil Dream Falters as $1.7 Billion Pacific Bid Falls Apart
2015-07-09 01:04:37.795 GMT
By Nacha Cattan and Christine Jenkins
(Bloomberg) -- Mexico’s Alfa SAB and partner Harbour Energy
Ltd. dropped their plans to buy Pacific Rubiales Energy Corp.
after the driller’s largest shareholder spurned a takeover offer
once valued at as much as $1.7 billion.
Pacific Rubiales said Wednesday it would have “no further
material obligations” to its former suitors after accepting
their withdrawal. Alfa said its offer “correctly valued”
Bogota-based Pacific Rubiales and had no plans to sweeten the
price.
The pullout derails Alfa’s quest to become an oil company
and take advantage of Mexico opening its fields to private
producers for the first time since 1938. The maker of lunchmeat
and car parts slumped 10 percent since being identified as a
bidder in May, a sign of investor dismay even as Pacific
Rubiales stakeholder O’Hara Administration Co. lambasted the
$C6.50-a-share bid as too low.
“We see this as positive for Alfa,” Ana Sepulveda, an
analyst at Invex Casa de Bolsa SA, said in a telephone interview
in Mexico City. “The requirements from funds that held stakes
in Pacific Rubiales were overvaluing the company.”
The original bid for Pacific Rubiales was about C$2.1
billion, or $1.7 billion, when it was made in May. By Wednesday,
the value had fallen to $1.6 billion. The company’s shares are
listed in Toronto as well as in Bogota.
Restarting Turnaround
Alfa’s exit means Pacific Rubiales executives now will have
to restart a turnaround effort, according to Nathan Piper, an
analyst at RBC Capital Markets. In a note, he estimated that the
company is saddled with about $4.5 billion in net debt and will
lose 35 percent of current production when the license for its
biggest field ends in 2016.
The rout in global crude prices erased 76 percent of
Pacific Rubiales’s market value in the past year.
Pacific said in a statement that it would continue with its
plans to reduce its debt and operating costs, and to divest non-
core assets. It also will continue to pursue “Mexico energy
opportunities” with Alfa as a partner.
The takeover plan had been set to go to Pacific Rubiales
shareholders this week until Alfa and Harbour requested the vote
be reset for July 28. O’Hara, the Venezuelan-led group that
controls almost 20 percent of Pacific Rubiales, said the
original bid was doomed to fail and said this week it had to be
sweetened to more than C$9 a share before it would consider the
bid.
O’Hara didn’t immediately respond to an e-mail and phone
message after regular business hours seeking comment on Alfa’s
retreat. Alfa holds about 19 percent of the shares.
“We thought our offer correctly valued Pacific Rubiales,”
Alfa Chief Executive Officer Alvaro Fernandez said in a
statement. “We are not willing to change our offer, therefore
we are terminating the Arrangement Agreement. We remain
committed to pursue opportunities in the Mexican energy sector
and will decide on the alternatives we have.”
Harbour is an investment firm formed by Asian commodity
trader Noble Group Ltd. and private-equity firm EIG Global
Energy Partners LLC to invest in energy assets worldwide.
For Related News and Information:
Stories on emerging markets: NI EM <GO>
Top stories on Latin America: TOPL <GO>
Stories on emerging-market currencies: TNI EM FRX <GO>
Most-read news on Mexico: MNI MEX <GO>
To contact the reporters on this story:
Nacha Cattan in Mexico City at +52-55-5242-9283 or
ncattan@bloomberg.net;
Christine Jenkins in Bogota at +57-1-313-7660 or
cjenkins28@bloomberg.net
To contact the editors responsible for this story:
James Attwood at +56-2-2487-4019 or
jattwood3@bloomberg.net;
Edward Dufner at +1-214-954-9453 or
edufner@bloomberg.net
Edward Dufner, Molly Schuetz
2015-07-09 01:04:37.795 GMT
By Nacha Cattan and Christine Jenkins
(Bloomberg) -- Mexico’s Alfa SAB and partner Harbour Energy
Ltd. dropped their plans to buy Pacific Rubiales Energy Corp.
after the driller’s largest shareholder spurned a takeover offer
once valued at as much as $1.7 billion.
Pacific Rubiales said Wednesday it would have “no further
material obligations” to its former suitors after accepting
their withdrawal. Alfa said its offer “correctly valued”
Bogota-based Pacific Rubiales and had no plans to sweeten the
price.
The pullout derails Alfa’s quest to become an oil company
and take advantage of Mexico opening its fields to private
producers for the first time since 1938. The maker of lunchmeat
and car parts slumped 10 percent since being identified as a
bidder in May, a sign of investor dismay even as Pacific
Rubiales stakeholder O’Hara Administration Co. lambasted the
$C6.50-a-share bid as too low.
“We see this as positive for Alfa,” Ana Sepulveda, an
analyst at Invex Casa de Bolsa SA, said in a telephone interview
in Mexico City. “The requirements from funds that held stakes
in Pacific Rubiales were overvaluing the company.”
The original bid for Pacific Rubiales was about C$2.1
billion, or $1.7 billion, when it was made in May. By Wednesday,
the value had fallen to $1.6 billion. The company’s shares are
listed in Toronto as well as in Bogota.
Restarting Turnaround
Alfa’s exit means Pacific Rubiales executives now will have
to restart a turnaround effort, according to Nathan Piper, an
analyst at RBC Capital Markets. In a note, he estimated that the
company is saddled with about $4.5 billion in net debt and will
lose 35 percent of current production when the license for its
biggest field ends in 2016.
The rout in global crude prices erased 76 percent of
Pacific Rubiales’s market value in the past year.
Pacific said in a statement that it would continue with its
plans to reduce its debt and operating costs, and to divest non-
core assets. It also will continue to pursue “Mexico energy
opportunities” with Alfa as a partner.
The takeover plan had been set to go to Pacific Rubiales
shareholders this week until Alfa and Harbour requested the vote
be reset for July 28. O’Hara, the Venezuelan-led group that
controls almost 20 percent of Pacific Rubiales, said the
original bid was doomed to fail and said this week it had to be
sweetened to more than C$9 a share before it would consider the
bid.
O’Hara didn’t immediately respond to an e-mail and phone
message after regular business hours seeking comment on Alfa’s
retreat. Alfa holds about 19 percent of the shares.
“We thought our offer correctly valued Pacific Rubiales,”
Alfa Chief Executive Officer Alvaro Fernandez said in a
statement. “We are not willing to change our offer, therefore
we are terminating the Arrangement Agreement. We remain
committed to pursue opportunities in the Mexican energy sector
and will decide on the alternatives we have.”
Harbour is an investment firm formed by Asian commodity
trader Noble Group Ltd. and private-equity firm EIG Global
Energy Partners LLC to invest in energy assets worldwide.
For Related News and Information:
Stories on emerging markets: NI EM <GO>
Top stories on Latin America: TOPL <GO>
Stories on emerging-market currencies: TNI EM FRX <GO>
Most-read news on Mexico: MNI MEX <GO>
To contact the reporters on this story:
Nacha Cattan in Mexico City at +52-55-5242-9283 or
ncattan@bloomberg.net;
Christine Jenkins in Bogota at +57-1-313-7660 or
cjenkins28@bloomberg.net
To contact the editors responsible for this story:
James Attwood at +56-2-2487-4019 or
jattwood3@bloomberg.net;
Edward Dufner at +1-214-954-9453 or
edufner@bloomberg.net
Edward Dufner, Molly Schuetz