Northern Blizzard Resources (NBZ.TO) – Odd Lot Tender Offer – 6% gain

Current Price –C$3.77

Offer Price - C$4

Upside – 6% (C$23 for odd lot holders)

Expiration Date - 20th of Jan 2017 (extended to 3rd of Feb, 2017)

No proration for Odd Lot Holders (99 shares and less)

SEDAR Filling

Background

This is a tiny (only C$23 gain for odd lots) risk free opportunity in Canada. Northern Blizzard Resources Inc. offers to purchase for cancellation from holders of common shares of Northern Blizzard for cash up to $75.0 million of its Shares at a price per Share of C$4.00, for a maximum of 18,750,000 Shares. As of December 9, 2016, there were 122,539,239 Shares issued and outstanding, and accordingly, the Offer is for up to approximately 15.3% of the total number of issued and outstanding Shares.

No proration for odd lot holders

If the number of Deposited Shares is greater than 18,750,000, such Deposited Shares will be purchased on a pro rata basis according to the number of Shares deposited, except that Odd Lot deposits will not be subject to pro-ration. For the purposes of the foregoing, an Odd Lot deposit is a deposit by a Shareholder who beneficially owns in the aggregate fewer than 100 Shares as of the close of business on the Expiry Date;

Source and Amount of Funds

Northern Blizzard has adequate freely available cash on hand to fund the purchase of the maximum number of Shares that could be purchased under the Offer. The Offer is not conditional upon the receipt of financing.

Tax treatment

Often distributions received from Canadian tenders are treated as dividends and in turn cause withholding tax burden on foreign shareholders. As per below, distributions received from tendering Norther Blizzard shares will be treated as sale of shares and thus there should be no additional taxes (as compared to US tenders).

A Non-Resident Shareholder who sells Shares to Northern Blizzard pursuant to the Offer will be deemed to receive a dividend equal to the excess, if any, of the amount paid by Northern Blizzard for the Shares over their paidup capital for Canadian income tax purposes. Northern Blizzard estimates that the paid-up capital per Share on the date of take-up under the Offer will be approximately $6.65. As a result, the Corporation expects that Non-Resident Shareholders who sell Shares under the Offer will not be deemed to receive a taxable dividend on the sale since the Offer contemplates that Northern Blizzard will purchase each Share at a price of $4.00. Accordingly, the amount paid by Northern Blizzard for the Shares will be treated as proceeds of disposition of the Shares.

17 COMMENTS

  1. SpeedWeaponry

    There is also a $0.02 dividend for shareholders of record on Dec. 30, 2016. Happy New Year!

    Another relevant note:

    “NGP IX Northern Blizzard S.à.r.l. (“NGP IX”) and R/C Canada Coöperatief U.A. (“R/C Canada”), the Company’s significant shareholders, have indicated that they intend to tender all of their shares pursuant to the Offer. Collectively, NGP IX and R/C Canada own 71.3% Northern Blizzard’s currently issued and outstanding Shares.”

    So there will be definite pro rata reductions for tenders greater than odd lots. Although with a 6% yield and stable oil production, it looks like a reasonable little company to hold if you are bullish on energy.

    1. dt

      The date for dividend has already passed due to T+3 settlement (on 28th of Dec stock already trades ex dividend). So no dividend for current buyers.

  2. Hong Yan

    Tried to look up NBZ.TO in my Fidelity account and found none. This ticker is trading in Toronto? How do i leverage this in the US?

    1. dt

      It is traded in Toronto. See here:
      https://www.google.com/finance?q=TSE%3ANBZ&ei=a6xkWNmyK83DsAH5t7GADg

      There is also OTC tracker for it in US, but it is very illiquid and I am not sure how the tender procedures work for such OTC listings (probably they do not).
      https://www.google.com/finance?q=OTCMKTS%3ANBZZF&ei=Kq1kWLCZHMb9sAGE6p7IDg

      Fidelity support should be able to advice you how to find the ticker. I have never used Fidelity, so I am clueless here. Also worth checking if they charge anything for participation in foreign tenders. This tiny deal might not be worth it after broker transaction costs.

    1. dt

      You shoud receive a message about corporate action, where you will be able to make a choice whether to tender or not.

    1. dt

      Indeed the transaction has been extended due to increase in the size of the offer to C$90m from previous C$75m (at least no other reason for extension is provided).

      Now the offer will expire on the 3rd of Feb. Those tendering will also be entitled to 2ct dividend at the end of Jannuary.

  3. Andrew Davis

    Just a note that this idea has gone onto the public “non active ideas” part of your site. The idea is actually still active because there’s been an extension.

    1. dt

      This happened automatically after a certain date. Moved it back to active ones. Thanks for the note.

  4. jsl zc

    Hi dt, I have noticed that the price has exceeded C$4 yesterday. It’s not reasonable for the price to go over 4. Is there anything new about it? Or I just simply sell the odd lots to earn more.

    1. dt

      My guess is that NBZ is trading higher due to Trump’s approval of Keystone XL pipeline, which will add additional link from Alberta (where NBZ fields are located) to US refineries. This is obviously a positive for the company, however the effect is hard to quantify (I am far from E&P expert).
      With shares trading above C$4, there is no point in tendering. Selling out for more makes more sense.

      1. dt

        I liquidated my position at C$4.08, with realized return of 9% (including dividends). However, in absolute terms this was just some pocket change (C$30).

  5. dt

    Another reason for the recent stock run-up was announced:

    http://www.investorx.ca/Doc/DH1D4GXZYDB/2017/01/31/northern-blizzard-resources-inc/news-release-english
    “Since the date of the Offer, Northern Blizzard received an unsolicited non-binding proposal (the “Proposal”) from a third party (the “Third Party”), whereby the Third Party expressed an interest in effecting a business combination with Northern Blizzard at an ascribed price that was in excess of the price offered to shareholders under the Offer. A special committee was formed to review the proposal. No agreement was reached and the proposal has expired. Northern Blizzard has no indication as to the Third Party’s current intentions, including whether the Third Party intends to submit an additional proposal.”

    So NBZ is now a potential take-out target. I am not getting involved here as E&P industry is beyond my expertise.

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