Trinidad Drilling Ltd. urged investors to reject a hostile takeover bid made by rival Ensign Energy Services as it tries to drum up a richer offer in a downtrodden energy market.
Calgary-based Trinidad on Thursday accused Ensign of undervaluing its prospects and taking advantage of what it called temporary weakness in its shares as it began a formal search for a white knight.
Ensign, chaired by London-based financier Murray Edwards, made the unsolicited approach in August. It is offering $1.68 per share in cash for Trinidad, in a deal valued at $470-million. With assumed debt, the deal is worth $947-million.
In an interview, Trinidad chief executive officer Brent Conway said the cash offer does not reflect a revamped cost structure and improving prospects in its international operations.
It also deprives Trinidad investors of potential upside in a rising market, he said.
“So to the extent somebody can put more value on the table and they can do it with a significant piece of equity, that’s a much better transaction for our investors,” he said by phone.
Shares in Trinidad were up about 2.8 per cent at $1.81 in Thursday trading on the Toronto Stock Exchange, suggesting some investors believed a higher offer could yet emerge.
Trinidad, which operates in Canada, the United States, Mexico and the Middle East, ended a six-month “strategic review” of alternatives last month, saying the process had not resulted in any offers that would mean higher value for shareholders. At the time, it said it would continue as a standalone company under a five-year operational plan, triggering a selloff in the shares.
Ensign president and chief operating officer Rob Geddes said Thursday that Trinidad has repeatedly failed to present shareholders with credible alternatives.
“Today’s unfortunate rejection is a further demonstration that a board who owns less than 1 per cent is focused on keeping their jobs, not creating wealth for shareholders,” he said in a statement. By contrast, Ensign is offering “a significant premium and immediate liquidity,” he said.
Ensign has criticized Trinidad’s strategy as “murky” and said it lacks certainty for investors. Before announcing its bid, Ensign said it had amassed 9.8 per cent of Trinidad shares.
Trinidad said Thursday a superior offer or alternative may emerge before Ensign’s offer expires on Dec. 14, although Mr. Conway acknowledged headwinds facing the Canadian energy sector may deter possible suitors.
“If that doesn’t happen, the message to our shareholders is we’re in a good position,” he said.