Crown Point investor seeks to take control of company
2014-11-11 18:45 ET - News Release
Mr. Gordon Kettleson reports
CROWN POINT ENERGY INC. SAYS ACTIVIST INVESTOR DEMANDS EXCLUSIVE RIGHT TO NEGOTIATE CHANGE-OF-CONTROL EQUITY FINANCING
Crown Point Energy Inc. has received correspondence from an activist investor that demands an exclusive right to negotiate a change-of-control equity financing with Crown Point. In the letter, the activist threatens to launch a proxy contest if Crown Point does not acquiesce to this exclusivity ultimatum by 5 p.m. (Calgary time) on Nov. 11.
Crown Point also advises shareholders that its board of directors has rejected the exclusivity demand and has adopted a shareholder rights plan, effective Nov. 11. The rights plan is intended to protect shareholders in certain circumstances.
"While rejecting the exclusivity demand, Crown Point is not averse to negotiating an equity financing in the near term to help fund the company's capital program and growth plans," said Gordon Kettleson, chairman of Crown Point. "However, given the unfavourable financing terms proposed by this activist and the absence of certain critical supporting information, we believe that the proposed exclusivity agreement will not serve the interests of the company and its shareholders at this time."
Terms of activist's proposed financing
The activist proposes that Crown Point increase its share capital by 25 per cent through an issue of new shares to the activist at 20 cents per share. The activist also proposes to receive a warrant for every two new shares issued. Each warrant would allow the activist to acquire an additional share from the company at a price of 30 cents per share for an unspecified period of time.
Crown Point notes that the activist has not provided the company with detailed background information on its structure, principals and shareholders. Further, as part of the financing, the activist proposes to take control of Crown Point's board and to replace Crown Point's management, but the activist has provided no information on its board nominees and replacement for management. The activist has refused to provide the company with additional information regarding its proposal unless the company agrees to the exclusivity rights demanded. The activist claims to be a 7-per-cent shareholder of Crown Point, but has not provided any information to verify this ownership.
Shareholder rights plan
The rights plan adopted by the board is designed to encourage the fair treatment of shareholders of the company in connection with any unsolicited takeover bid; to ensure, to the extent possible, that the shareholders of the company and the board have adequate time to consider and evaluate any unsolicited takeover bid; and to ensure, to the extent possible, that the board has adequate time to identify, develop and negotiate value-enhancing alternatives, if considered appropriate, to any unsolicited takeover bid.
The purpose of the rights plan is to encourage a potential bidder to make a "permitted bid," having terms and conditions designed to meet the objectives of the rights plan, or to negotiate the terms of an offer with the board. A permitted bid is a takeover bid that is made to all holders of common shares of the company for all of the common shares held by them, by way of a takeover bid circular prepared in compliance with applicable securities laws; that remains open for acceptance by shareholders of the company for 90 days (or such shorter period of time as may be approved by the board from time to time); and that satisfies certain other conditions.
The rights plan is subject to approval of the TSX Venture Exchange, and requires approval by Crown Point's shareholders within six months of the rights plan's effective date, failing which it will terminate.
A copy of the rights plan will be available under the company's profile on SEDAR.
We seek Safe Harbor.
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