Encana (ECA) – Odd Lot Tender Offer – $70 Upside

Current price: $4.0

Tender Price: $4.70 – $5.40

Upside: 4% or $60 for odd lot holders

Expiration Date: 14th of August, 2019

Tender Announcement


Another dutch tender offer with odd lot provision, but this time trading below the lower tender limit. Just quick thoughts as upside is tiny in absolute value.

Encana – Canadian O&G producer dual-listed in US and Canada – is buying back 3% of outstanding shares at $4.7-$5.4 per share. The stock is currently trading at all time lows and recently dropped further following Q2’19 results. The offer is likely to be oversubscribed and thus potentially interesting for odd-lot holders only.

Tender is not conditioned on financing and Encana will fund the purchase of shares ($230m) using cash on hand ($137m as of Q2’19) and existing credit facilities.

The company could cancel the tender as shares declined more than 10% since the announcement (one of the conditions). However, I do not think this is likely as Encana has already spent $1bn buying back shares since Mar’19 at higher prices than the current offer.

Non-Canadian residents might be charged with withholding tax on deemed dividend portion of the distribution, however, as paid-up capital (equivalent to US$6.31/share) is higher than the purchase price, my understanding is that deemed dividend will be zero.

A Non-Canadian Holder who sells Shares to Encana pursuant to the Offer will be deemed to receive a dividend equal to the excess, if any, of the amount paid by Encana for the Shares over their paid-up capital for purposes of the Tax Act. However, a Non-Canadian Holder who sells Shares to Encana pursuant to the Offer will not be deemed to receive a taxable dividend as a result of the sale if the paid-up capital for the purposes of the Tax Act at the time of the sale is equal to or in excess of the amount paid by Encana for the Shares pursuant to the Offer. Encana estimates that the paid-up capital per Share on the date hereof is approximately Cdn$8.39 (and following the Expiration Date, Encana will advise Shareholders of any material change to this estimate, including the U.S. dollar equivalent of the paid-up capital at that time).

The main risk here is that odd lot provision gets amended if too many odd lot accounts participate – unlikely to happen as the upside is small.


9 thoughts on “Encana (ECA) – Odd Lot Tender Offer – $70 Upside”

  1. There have been some rumors out there that with the market fall and drop in oil the auction may be adjusted/postponed/cancelled. I still bought the odd lot though, as insiders are buying ECA too and figure its a small punt.

  2. Seems those rumors panned out- offer is extended to Aug 28th and revised to price between 4.15 and 4.75.

  3. Old tenders withdrawn. Have to re-tender, or sell!

    “As a result of the amendment to the Offer, if a shareholder has previously tendered Shares, such tender is no longer valid, and the shareholder WILL BE REQUIRED TO PROPERLY RETENDER THEIR SHARES to accept the Offer. For greater certainty, any and all Shares previously tendered will be deemed to be withdrawn, and the shareholder must take additional steps if they wish to participate in the amended Offer.”

  4. Share price being shoved down probably because of amended offer, potential value play?

    • The tender is only for 5% of shares outstanding. It was adjusted downwards due to the stock cratering, not the other way around.

      • Oh yeah that’s true, thanks Writser. Should’ve thought about that..

  5. I have closed the position yesterday at $4.4.

    With lowered tender prices and shares currently trading in the middle of the range I do not think much more upside is likely to be achieved by waiting for tender expiration.

    In any case even with negative developments, still pocketed $40 for kids’ ice-cream

  6. Results out at 6:45am: 127 million shares tendered, 47m accepted at $4.50 or 3.5% of total shares. 71% proration, except for odd lots. Premarket up to 9:15am: 4.31 to 4.52, 4.40 now.

    My computations: 47m accepted with 71% proration, so 67m shares (plus odd lot shares) were tendered at $4.50 or less. Thus, roughly half tendered at $4.50 or less, and half wanted higher than $4.50.

    My interpretation: holders want a higher price. Only 9.5% submitted to tender, and half of them wanted higher than $4.50. Bullish sign.



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