New West Energy Services Inc. Announces Proposed Share Consolidation and Going Private Transaction
CALGARY, AB, March 12, 2021 /CNW/ - New West Energy Services Inc. (TSX Venture: NWE), an oil and gas and environmental services company focused on Western Canada, today announced that it intends to seek shareholder approval for a proposal to complete the process of taking NWE private.
Background
The common shares (the "Common Shares") of NWE were listed for trading on the TSX Venture Exchange (the "TSXV") under the symbol "NWE". As a public company, management of NWE had been unable to secure needed financing and NWE's directors believed that the minimal trading activity of the Common Shares no longer justified the expense and administrative requirements associated with maintaining the listing. As such, NWE's directors believed that it was in the best interests of NWE and all stakeholders to have the Common Shares voluntarily delisted from the TSXV and for the directors to consider options for taking NWE private and it ceasing to be a reporting issuer in Canada subsequent to a delisting. At an annual and special meeting of the shareholders held on December 11, 2020, the shareholders, excluding votes attached to Common Shares held by promoters, directors, officers or other insiders of NWE, approved an ordinary resolution authorizing NWE to delist the Common Shares from the TSXV. Following this, the Common Shares were voluntarily delisted from the TSXV effective December 24, 2020.
Proposed Consolidation of Common Shares
NWE plans to complete the process of taking NWE private by way of a consolidation (the "Consolidation") of the Common Shares on the basis of one post-Consolidation Common Share for every 27,498,810 Common Shares held immediately prior to the Consolidation. Subsequent to the completion of the Consolidation, NWE will apply to cease to be a reporting issuer in each province in which it is currently a reporting issuer, being Alberta and British Columbia.
Effective March 8, 2021, NWE entered into a consolidation agreement (the "Consolidation Agreement") with the following shareholders of the company: William A. Rand (director and control person of NWE), Gerry E. Kerkhoff (President and CEO of NWE), Galin A. Kerkhoff (manager of NWE) and Nations Fund I, LLC (control person of NWE) (collectively, the "Interested Shareholders"). Pursuant to the Consolidation Agreement, prior to the effective date (the "Effective Date") of the Consolidation, a corporation is to be incorporated under the Business Corporations Act (Alberta) ("Newco") and the Interested Shareholders have agreed to transfer to Newco those Common Shares owned by them, being in aggregate 27,498,810 Common Shares, and, in return, will be issued the same number of common shares of Newco. Upon completion of the Consolidation, Newco will be the sole shareholder of NWE.
Shareholders (other than those shareholders who dissent pursuant to the Canada Business Corporations Act (the "CBCA")) who hold fractional shares upon completion of the Consolidation (collectively, "Minority Shareholders") will receive a cash payment of $0.002 per pre-Consolidation Common Share (the "Consideration") on account of such fractional shares, such payment to be made without interest upon delivery of certificates representing their Common Shares, a duly completed Letter of Transmittal and such other documents as NWE or its depositary may reasonably require. Upon the Effective Date, all fractional Common Shares will be cancelled and the Minority Shareholders will no longer be entitled to any other rights as shareholders of NWE other than the right to receive the Consideration.
Special Meeting and Shareholder Approval
A special meeting (the "Meeting") of NWE's shareholders has been called for April 7, 2021, at which time shareholders will be asked to consider and, if deemed advisable, approve the Consolidation. All shareholders of record as of March 2, 2021 (the "Record Date") will be entitled to receive notice of and to vote at the Meeting. In connection with the Meeting, NWE will distribute a management information circular, Letter of Transmittal and other accompanying materials on or around March 12, 2021 to all shareholders of record as of the Record Date.
In order to be effective, the resolution approving the Consolidation must be approved by at least two-thirds of the votes cast in respect thereof by shareholders present in person or represented by proxy at the Meeting. In addition, because the Consolidation is a "business combination" within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the resolution must be approved by a majority of the votes cast in person or by proxy at the Meeting by the shareholders, excluding the votes attaching to the Common Shares held by the Interested Shareholders.
Fairness to Minority Shareholders
Evans & Evans, Inc., a leading Canadian boutique investment banking firm with offices and affiliates in Canada, the United States and Asia, was engaged by the board of directors (the "Board") of NWE to provide an independent opinion as to the fairness of the Consideration. In their written opinion, a copy of which is included in the management information circular being mailed to the shareholders of NWE, Evans & Evans concluded that, as of the date of their review, the Consideration is fair, from a financial point of view, to the Minority Shareholders.
The Consolidation is exempt from the formal valuation requirement under MI 61-101 as NWE's securities are not listed or quoted on any stock exchange listed at paragraph 4.4(1)(a) of MI 61-101.
Board Approval and Recommendation
At a meeting held on February 25, 2021, the Board considered options for taking NWE private and it ceasing to be a reporting issuer in Canada. After a discussion, the Board unanimously, with Messrs. William A. Rand and Gerry E. Kerkhoff abstaining from voting due to their interest in the Consolidation, determined that the Consolidation was in the best interests of all shareholders, including the Minority Shareholders, and stakeholders and approved the same. The reasons for the Board approval include the following:
- NWE's ability to continue as a going concern is in doubt given declining revenues, high unserviceable debt levels and the inability of management to secure needed financing;
- the conclusion of Evans & Evans that the Consideration is fair, from a financial point of view, to the Minority Shareholders;
- the Consolidation represents a liquidity opportunity in absence of a public market for the Common Shares and will allow the Minority Shareholders to dispose of their Common Shares for the Consideration without incurring brokerage fees or commissions;
- the Consolidation will be subject to Minority Shareholder approval pursuant to MI 61-101; and
- shareholders may dissent in respect of the resolution approving the Consolidation pursuant to the CBCA and be entitled to be paid the fair value of their Common Shares.
Funding of Consideration
The Consideration payable to shareholders upon completion of the Consolidation will be funded by NWE. Pursuant to the Consolidation Agreement, Mr. William A. Rand has agreed to lend to NWE such funds equal to the aggregate amount of the Consideration required to be paid to the shareholders. The loan will have an interest rate of 9% per annum, calculated and compounded monthly, on the outstanding principal amount until paid in full. The principal amount of the loan and outstanding interest shall be payable by NWE to Mr. Rand on demand.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Cautionary Note Regarding Forward-Looking Information
Certain statements in this news release may constitute "forward-looking information" within the meaning of applicable securities laws that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking information and financial outlook. Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions. Such information may involve, but is not limited to, comments with respect to strategies, expectations, planned operations or future actions. Forward-looking information in this news release includes, without limitation, statements with respect to: the receipt of approval of the NWE shareholders to the Consolidation; NWE giving effect to the Consolidation; and Mr. Rand lending to NWE the funds to pay the Consideration. Actual events or results may differ materially. This forward-looking information is only a prediction based upon NWE's current expectations, and actual events or results may differ materially. NWE may not actually achieve the plans, intentions or expectations disclosed in its forward-looking information. Forward-looking information is subject to known and unknown risks and uncertainties and is based upon uncertain assumptions that could cause NWE's actual results and the timing of events to differ materially from those anticipated in such forward-looking information. You are cautioned not to place undue reliance on this forward-looking information, which speak only as of the date of this press release. NWE does not assume any obligation to publicly update or revise such forward-looking information to reflect new information, subsequent or otherwise, except as may be required by applicable law. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement.
SOURCE New West Energy Services Inc.
Gerry E. Kerkhoff, New West Energy Services Inc., President and Chief Executive Officer, Phone - 403.879.8977, Email - [email protected]
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