Current price: C$6.46
Offer price: TBD
Expiration Date: by the 7th of Feb’20
This idea was hinted by Chris.
Orca Exploration (natural gas assets and supply agreements in Tanzania) announced intentions to launch dutch tender offer for over 20% of its class B shares as a result of strategic review. The pricing range has not been determined yet. I expect the offer to be priced at least at small premium to current share prices which in turn should result in a share price pop upon announcement. That’s where the trade rests currently – merits of participating in the tender itself will be assessed after the release of tender documentation.
Liquidity is limited. Pre-announcement price stands at C$6.24/share.
- In mid 2019 ORC rejected an unsolicited offer from Swala Oil & Gas at C$7.50/share. The buyer then sweetened the proposal to C$8.25/share, but ORC stated that it still significantly undervalues the company. Subsequently management started a strategic review and finally rejected Swala’s offer once again with the current announcement.
- During 2019 ORC has repurchased about 3% of class B shares at average price of C$6.43/share in the open market.
- Paid up capital stands at around C$90m or c. C$2.6/share – significantly below the expected tender prices. As with other Canadian tenders, the difference between tender prices and paid-up capital will likely be treated as deemed dividend and taxed accordingly.
- The company has two types of common shares – Class A voting shares (1.75m) and Class B shares (32.6m). Shaymar Trust (entity of the founder and ex-chair, ex-CEO David Lyon who deceased in mid 2018) holds 21% fully diluted shares of ORC and 59% of voting shares. Currently the beneficiaries of the trust are the children of the David Lyon, who also have seats on the board.
- The company intends to fund the offer from the existing cash balance.