Orca Exploration (ORC-B.V) – Odd Lot Tender Offer – C$40 Upside

Current Price: C$6.10

Offer Price: C$6.50-C$7.50

Upside: C$40 (tendering 99 shares at the lower limit)

Expiration Date: 20th of January

Issuer bid circular

 

Just a tiny note on the potential odd lot arbitrage idea.

Orca Energy Group (natural gas assets and supply agreements in Tanzania) has launched a tender offer for 25% of its outstanding Class B shares. The price range is set at C$6.50-C$7.50/share. It is almost guaranteed that the offer will end up heavily oversubscribed and priced at the lower limit as:

• the largest Class B shareholder Shaymar (owns 19%) intends to tender the full amount of its holdings.
• last year the company has already done a similar offer – bought back 22% of class B shares at the same range. The offer ended up priced at the lower limit and oversubscribed by over 2x. The last time Shaymar tendered only 1.7m shares vs 4.7m this time.

However, odd-lot shareholders (<100 shares) will be exempt from proration, which offers rather a quick and low-risk opportunity to cash in C$40.

No withholding taxes will apply as the company is incorporated in the British Virgin Islands.

The company holds C$100m of cash (vs C$40m needed for the tender) and has been pressured by the shareholders to distribute the excess cash. Therefore, the risk of the transaction getting cancelled looks minimal.