ESI Energy Services Inc. Termination of Cobalt Agreement - Going Private Transaction
CALGARY, AB, Feb. 16, 2021 /CNW/ - ESI Energy Services Inc. ("ESI") (CSE: OPI) announces that it and Battery Mineral Resources Corp. ("BMR") have terminated their Process Facility and Cobalt Supply Agreement. ESI also announces that it intends to pursue a going private transaction to buy out ESI's minority shareholders.
Termination of Process Facility and Cobalt Supply Agreement
ESI and BMR terminated the Process Facility and Cobalt Supply Agreement entered into in May 2018 by ESI and a predecessor in interest and a current subsidiary of BMR. The agreement related to BMR's cobalt-focused mineral exploration claims located in Ontario. If the project proceeded, ESI was to finance, build and operate a cobalt processing facility supplied by feedstock material mined by BMR from its properties in Ontario.
ESI made a CAD $10 million payment to BMR in July 2018 for the right to participate in the project. The agreement was carried by ESI as an intangible asset until the end of the first quarter of 2020, when a non-cash impairment charge was recorded to reduce the carrying value to zero. The factors which led to that decision are outlined in Note 8 to ESI's unaudited interim financial statements as at and for the three months ended March 31, 2020.
ESI's desire to focus on its existing and successful operating business caused ESI and BMR to determine that termination of the agreement was in their respective best interests. The agreement was terminated without further liability and BMR agreed to support the going private transaction described below.
Going Private Transaction
ESI intends to pursue a going private transaction to buy out ESI's minority shareholders.
ESI anticipates that the going private transaction will be completed by consolidating ESI common shares, at a consolidation ratio to be determined, so that the minority shareholders of ESI will hold fractional ESI common shares after consolidation. ESI will then purchase those fractional shares for cash and cancel them.
The result will be that BMR, which currently owns 89.2% of the ESI common shares, will own 100% of the ESI common shares after the completion of the share consolidation. BMR has agreed to support the transaction by voting in favor of the transaction the ESI common shares that BMR owns.
The cash payment to minority shareholders will be based on the number of ESI common shares held by minority shareholders before the share consolidation. The amount of the cash payment per pre-consolidation ESI common share will be based on an assessment of the value of ESI. Although not required by securities laws, ESI's independent directors and the board of BMR will together obtain an independent third-party valuation of ESI. Based on that valuation, and on other factors, the amount of the cash payment per ESI common share held by minority shareholders will be determined. ESI has sufficient funds to complete the transaction.
The share consolidation must be approved by ESI shareholders at a special meeting called for that purpose. The level of approval will be 66 2/3% of ESI common shares voted at the meeting plus a majority of the votes cast by minority shareholders. ESI anticipates that the special meeting of shareholders will occur by April 30, 2021.
After the share consolidation is approved by ESI shareholders and accepted by the Canadian Securities Exchange, ESI will file articles of amendment with the Alberta Registrar of Corporations to effect the share consolidation. Once the share consolidation is completed, ESI intends to apply to the Canadian Securities Exchange to delist its common shares and apply to applicable Canadian provincial securities regulatory authorities to cease its reporting issuer status.
Structuring of the transaction is subject to confirmation of applicable securities laws, tax laws and Canadian Securities Exchange policies. Completion of the transaction is subject to a recommendation by an independent committee of ESI directors and approval by ESI directors.
ESI's directors believe that a going private transaction would be in the best interests of ESI. The market for ESI common shares is illiquid and the trading price of ESI common shares does not properly reflect the value of the shares. The expenses of being a public company outweigh the benefits. Finally, BMR has indicated an intent to sell its equity interest in ESI within 12 months or sell ESI in its entirety if BMR acquires a 100% interest in ESI. ESI as a private company would facilitate an easier sale by BMR.
About ESI
The outstanding common shares of ESI are listed on the Canadian Securities Exchange under the stock symbol "OPI". ESI is a pipeline and renewables equipment rental and sales company with principal operations in Leduc, Alberta and Phoenix, Arizona. ESI, together with its operating subsidiaries, ESI Pipeline Services, Inc. and ESI Energy Services (Australia) Pty Ltd., supplies (rents and sells) backfill separation machines, called padding machines, to mainline pipeline contractors, renewables and utility construction contractors, as well as oilfield pipeline and construction contractors. The head office of ESI is located at Suite 500 727 - 7th Avenue S.W., Calgary, Alberta T2P 0Z5.
Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Forward-looking statements can be identified by the use of words such as "are expected", "is forecast", "is targeted", "approximately" or variations of such words, and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance to be materially different from any future results or performance expressed or implied by the forward-looking statements.
Forward-looking statements in this news release include, but are not limited to: (a) with respect to termination of the cobalt agreement, statements concerning ESI's desire to focus on its existing operating business and that termination of the agreement is believed to be in the best interests of ESI; and (b) with respect to the going private transaction, statements concerning ESI's intention to effect a going private transaction, the share consolidation structure of the transaction, that BMR will hold 100% of the ESI common shares after the transaction, determination of the amount of the cash payment per ESI common share held by minority shareholders, availability of funds, shareholder approval levels, the timing of a special meeting of ESI shareholders, delisting of ESI common shares and ceasing of reporting issuer status and why the transaction is believed to be in the best interests of ESI.
Forward-looking statements are based on a number of factors and assumptions made by management and considered reasonable at the time such statements are made. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual events to be materially different from those expressed or implied by the forward-looking statements.
SOURCE ESI Energy Services Inc.
Robert Dunstan, President and Chief Executive Officer, ESI Energy Services Inc., +1-403-262-9344, [email protected]
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