Waterous launches bid to acquire Osum shares for C$126m

Canadian energy private equity firm Waterous Energy Fund has launched a bid to acquire up to 52.5 million shares, or about 40 percent, of Osum Oil Sands Corp, a Calgary-based oil sands producer.

Canadian energy private equity firm Waterous Energy Fund has launched a bid to acquire up to 52.5 million shares, or about 40 percent, of Osum Oil Sands Corp, a Calgary-based oil sands producer. The deal would see Osum shareholders receive C$2.40 per share, implying a total value of C$126 million. Waterous currently owns about 45 percent of the company.


CALGARY, AB, Nov. 2, 2020 /PRNewswire/ – Waterous Energy Fund (“WEF”) today announced its intention to launch a formal take-over bid (the “Offer”) through a subsidiary of WEF to the shareholders of Osum Oil Sands Corp. (“Osum”) to acquire up to a maximum of 52,500,000 of Osum’s outstanding common shares, representing approximately 40% of the outstanding common shares of Osum. Under the terms of the Offer, Osum shareholders will receive cash consideration of $2.40 per share for each share tendered to the Offer that is acquired by WEF, implying a total transaction value of $126 million. WEF expects to formally launch the Offer as soon as reasonably practicable.

WEF is currently the owner of approximately 45% of the outstanding common shares of Osum. If the Offer is successful, WEF will own a minimum of approximately 73% and a maximum of approximately 85% of Osum. WEF intends to acquire all of the remaining common shares as soon as possible following, but no later than 120 days after, the date of expiry of the Offer for the same $2.40 in cash per share through a plan of arrangement, an amalgamation or other similar transaction (“Second Stage Transaction”).

WEF has arranged the debt and equity financing required to fund the entire cash consideration payable for the common shares in connection with the Offer and the subsequent completion of a Second Stage Transaction. Scotiabank and Canadian Imperial Bank of Commerce are leading the debt financing associated with the transaction.

“The proposed transaction provides immediate liquidity and certainty of value to Osum shareholders after 15 years without any dividends or prospects of accessing the public markets,” said Adam Waterous, CEO of Waterous Energy Fund. Waterous continued, “The $2.40 per share offer price represents the same price that WEF paid this past summer when we acquired our initial 45% interest in Osum from three highly sophisticated global financial institutions. Osum shareholders should have confidence that fair market value for their shares has been established.”

Reasons to Accept the Offer
Three Largest Shareholders Have Already Exited at the Offer Price. In July 2020, WEF acquired a 45% interest in Osum at $2.40 per share from three highly sophisticated global financial institutions (the “Initial Selling Shareholders”) with extensive experience in the Canadian oil and gas industry. The Initial Selling Shareholders and their financial advisors ran a competitive auction process for their shares which involved a number of bidders, and WEF was the successful bidder in that process. Since transacting with the Initial Selling Shareholders, the price of West Texas Intermediate crude oil has dropped, and the industry has continued to experience headwinds. Given the increased uncertainty in the sector, we believe holding the same offer price is highly compelling for shareholders today.

Next Five Largest Shareholders Want to Exit at the Offer Price. WEF has executed support agreements with Osum’s next four largest remaining institutional shareholders, and expects the fifth largest institutional shareholder to have executed a support agreement by, or shortly after, the launch of the Offer (collectively, the “Supporting Shareholders”), under which such shareholders have agreed, or will agree, to tender their common shares under the Offer. The Supporting Shareholders collectively own in aggregate approximately 20% of the total outstanding Osum common shares.

High Likelihood of Completion. For the Offer to be successful, more than 50% of the shares not currently owned by WEF must be tendered (the “Minimum Tender Condition”). The Supporting Shareholders already represent approximately 36% of the outstanding common shares not currently owned by WEF, or 72% of the outstanding common shares required to be tendered to achieve the Minimum Tender Condition.
Competing Offer Highly Unlikely. WEF believes that it is highly unlikely that a competing offer will be made, particularly in light of the thorough auction process run by the Initial Selling Shareholders throughout the spring and summer of 2020. Moreover, because WEF already owns approximately 45% of the Common Shares, any alternative transaction involving the acquisition of Osum would be subject to WEF’s approval.
Osum has Failed to Return Capital to Shareholders or Offer any Meaningful Liquidity Event for Fifteen Years. Fifteen years after being formed, Osum still has not been able to pay a dividend to its owners, achieve an initial public offering or other value enhancing transaction to provide shareholders with a liquidity event. There is no clear plan for shareholders to get liquidity for their shares.

Offer Details
Full details of the Offer will be set out in an Offer to Purchase and Takeover Bid Circular and Letter of Transmittal and Notice of Guaranteed Delivery (collectively, the “bid documents”) that will be mailed to Osum shareholders and filed with applicable securities regulators in Canada in accordance with applicable securities laws. A copy of the bid documents will be made available on www.waterous.com. The Offer is expected to remain open until February 24, 2021, unless extended, varied or withdrawn by WEF in accordance with its terms.

If more than 52,500,000 shares are tendered to the bid, then the number of shares acquired by WEF from each shareholder will be reduced on a pro rata basis in accordance with applicable securities laws.

The Offer will be subject to certain conditions, including the minimum tender condition, receipt of necessary regulatory approvals, no occurrence of a material adverse effect, and other customary conditions. WEF may waive any of the conditions to the Offer other than the Minimum Tender Condition. The Offer will not be subject to any conditions relating to due diligence, financing or shareholder approval of WEF, all as will be outlined in the bid documents. Subject to applicable law, WEF reserves the right to withdraw or extend the Offer and to not take up and pay for any Osum shares deposited under the Offer unless each of the conditions of the Offer is satisfied or, where permitted, waived by WEF at or prior to the expiry time of the Offer.

Our Depositary and Information Agent is Kingsdale Advisors. If you have any questions or require assistance, or to receive the bid documents free of charge, please contact Kingsdale Advisors, by telephone toll-free in North America at 1-866-581-0506 and at 1-416-867-2272 outside of North America or by e-mail at contactus@kingsdaleadvisors.com.

Scotiabank and CIBC Capital Markets are acting as financial advisors to WEF in connection with the transaction.

Scotiabank and Canadian Imperial Bank of Commerce are serving as Co-Lead Arrangers and Joint Bookrunners on the senior secured extendible revolving reserve-based loan.

Blake, Cassels & Graydon LLP is serving as legal advisor to Waterous Energy Fund in connection with the transaction, and Stikeman Elliott LLP is serving as fund counsel to Waterous Energy Fund.

Kingsdale Advisors has been retained as the Depository and Information Agent in connection with the proposed transaction.

About Waterous Energy Fund: Waterous Energy Fund is a Calgary-based energy investment firm with offices in Houston and New York. Founded in 2017, the firm is pursuing investments in the North American oil and gas sector. For additional information, see www.waterous.com.