IPC to acquire hedge fund-backed Granite Oil

Calgary-based junior oil producer Granite Oil Corp has agreed to be bought by International Petroleum Corp in a deal that values the business at C$79.7 million.

Granite Oil Corp, a Calgary-based junior oil producer, has agreed to be acquired by International Petroleum Corp, a Vancouver-based oil and gas exploration and production company. The deal values Granite at about C$79.7 million, including debt. GMT Capital Corp, a U.S. hedge fund and Granite’s largest shareholder, has agreed to support the transaction.

PRESS RELEASE

Granite Oil Corp. Agrees to Sale to International Petroleum Corporation For $0.95 Cash Per Share

CALGARY, Alberta, Jan. 20, 2020 (GLOBE NEWSWIRE) — GRANITE OIL CORP. (“Granite” or the “Company”) (TSX: GXO)(OTCQX:GXOCF) is pleased to announce that it has entered into an arrangement agreement (the “Agreement”) with International Petroleum Corporation (TSX, Nasdaq Stockholm: IPCO) (“IPC”), pursuant to which IPC will acquire all of the issued and outstanding common shares of Granite (the “Shares”) for cash consideration of $0.95 per Share (the “Transaction”). The Transaction is to be completed by way of a plan of arrangement under the Business Corporations Act (Alberta) (the “Arrangement”). The Transaction values Granite at approximately $79.7 million, including the assumption by IPC of Granite’s net debt and transaction costs. The cash consideration offered to Granite shareholders represents a 61% premium to the closing price of the Shares on January 17, 2020 and a 77% premium over the 30-day volume weighted average trading price of the Shares on the TSX up to and including January 17, 2020.

The board of directors of Granite (the “Board”) formed a committee of independent directors (the ‎‎”Special Committee”) on December 4, 2019 to, among other things, review and evaluate the terms of the unsolicited proposal from ‎IPC, review and consider alternatives to the Transaction, and to negotiate the terms and conditions of the Transaction and to make a ‎recommendation to the Board in respect of the Transaction and other related matters.‎

Cormark Securities Inc. and National Bank Financial Inc. acted as co-financial advisors to Granite and have each provide its verbal opinion that, as of the date hereof and subject to review of final documentation, the consideration to be received by Granite shareholders pursuant to the Transaction is fair, from a financial point of view, to Granite shareholders (the “Fairness Opinions”)‎.

Following an extensive review and analysis of the Transaction and the consideration of other available ‎alternatives, the Fairness Opinions and the recommendations of the Special Committee, the Board, ‎after consulting with its financial and legal advisors, ‎unanimously approved the Transaction and determined to recommend to Granite shareholders to vote in favour of the Arrangement at a meeting of Granite shareholders scheduled to take place on or about March 5, 2020 (the “Meeting”).

The Arrangement is subject to a number of customary conditions including, but not limited to, the approval of at least 66 2/3% of the votes cast in person or by proxy at the Meeting and a majority of the votes cast by disinterested shareholders pursuant to the requirements of applicable securities laws, as well as customary court and regulatory approvals. Closing of the Transaction is also subject to the satisfaction of a number of conditions customary for ‎transactions of this nature. ‎

The Agreement permits Granite to respond to unsolicited acquisition proposals under certain circumstances which include where such acquisition proposal constitutes or could reasonably constitute or lead to a “superior proposal” (as defined in the Agreement). IPC has the right to match any superior proposal. Granite has agreed to pay a termination fee of $1.2 million in certain circumstances where the Agreement is terminated, including termination in response to a superior proposal. Granite and IPC have also agreed to a reciprocal expense reimbursement fee of $800,000 payable to the other if the Transaction is not completed in certain circumstances, and where a termination fee is not otherwise payable. The Agreement contains customary deal protection provisions which, among other matters, restrict Granite from soliciting or initiating any discussions in respect of alternative acquisition proposals related to the Granite or the assets of Granite.

All of the directors and officers of Granite as well as certain entities related to GMT Capital Corp. Granite’s largest shareholder, together representing approximately 25% of the total Shares outstanding, have entered into support agreements with IPC pursuant to which they have confirmed their intentions to vote their Shares in favour of the Arrangement, subject to certain termination provisions in the event the Agreement is terminated.

An information circular in connection with the Transaction is expected to mailed to Granite shareholders on or about February 10, 2020 with closing of the Transaction expected to occur on or about March 5, 2020 or as soon as practicable thereafter.

Concurrently, in a separate press release, Granite is announcing the summary results of the independent reserves report prepared by Sproule Associates Limited with an effective date of December 31, 2019.

A copy of the Agreement will be filed on Granite’s SEDAR profile and will be available for viewing at www.sedar.com.

Advisors
Cormark Securities Inc. and National Bank Financial Inc. acted as co-financial advisors to the Special Committee and DLA Piper ‎‎(Canada) LLP is acting as legal counsel to Granite in respect of the Transaction.

Contacts
For further information, please contact Michael Kabanuk, President & CEO, by telephone at (587) 349-9123, or Devon Griffiths, COO, by telephone at (587) 349-9120.