Pacific Rubiales Petroleum workers stand next to oil excavation pipes at the Campo Rubiales field in Meta, eastern Colombia in April, 2010.JOSE MIGUEL GOMEZ/Reuters
Pacific Rubiales Energy's bid to buy Petrominerales Ltd. for $935-million was announced in September, but it didn't happen overnight. The deal was the product of more than 21 months of negations and unsolicited bids for the target company.
Back in late 2010, the Calgary-based, Latin America-focused Petrominerales was spun out of 65-per-cent owner Petrobank Energy and Resources Ltd. Although the company's share price had climbed through 2010, it would hit its peak in February, 2011, and fell nearly 60 per cent through the rest of the year as the company faced challenges such as costly pipeline disruptions in early 2011.
Petrominerales first prepared to receive suitors back in January of 2012, according to a recently-filed proxy circular. The company was concerned that "prevailing market conditions" might lead to unsolicited acquisition offers or proposals.
So, TD Securities was hired to look do a strategic review, look for bidders and provide merger advice.
For eight months, Petrominerales received "unsolicited expressions of interest" from a number of companies, including Toronto-based Pacific Rubiales, which also has South American assets. This resulted in lots of preliminary discussions.
As the number of interested parties mounted, TD set up a data room in September of 2012. And in the five subsequent months seven "potential counterparties" were allowed to review confidential information about the business. Seven potential bidders signed confidentiality agreements, but Pacific Rubiales wasn't one of them.
Petrominerales received two non-binding expressions of interest from one of these interested parties in December, 2012 and April, 2013. This unnamed potential buyer wanted a long, exclusive negotiating period and more due diligence. But the two sides couldn't agree on terms, and the potential acquisition fell by the wayside. Petrominerales' stock fell another 50 per cent in 2012.
By June, Petrominerales' review process had been continuing for a year and a half, and since none of its talks seemed likely to lead to a deal, it closed its data room.
It was business as usual until Aug. 20, when Pacific Rubiales got in touch to "discuss the possibility of a business transaction." It submitted an unsolicited non-binding expression of interest for an all-cash transaction to acquire all shares.
Petrominerales, in turn, went back to previously interested bidders and received some interest. But it would be Pacific Rubiales that came out ahead.
The Petrominerales board of directors and management met with TD Securities on Sept. 17 to review company options. By this time, Pacific Rubiales had put forth three expressions of interest and "contemplated an increase in the cash component of the offer." By the end of the meeting, the board was supportive of management closing the deal.
An arrangement agreement was reached on Sept. 29 and the terms were unanimously approved by the board of directors at Pertrominerales. On Sept. 30, the company said every share would be worth $11 as well as a share in the new company, ResourceCo.
The cost of the arrangement for Petrominerales, and the newly spun-out subsidiary ResourceCo, totalled $32.3-million. That included items such as severance, bonus and change of control payments and fees to experts.