Oil and gas producer Iron Bridge Resources Inc. reached an agreement with fellow producer Velvet Energy Ltd. that raised the cash consideration for the Velvet Energy acquisition of Iron Bridge's shares to about 85 Canadian cents per share, or 13%, resulting in proceeds of about C$142 million.
Velvet Energy previously offered to acquire Iron Bridge's shares for 75 Canadian cents per share, for a total of C$120 million. The new offer represented a 78% premium above the closing price of Iron Bridge's shares on the Toronto Stock Exchange as of May 11, or the day before Velvet made its original proposal. The total consideration includes the assumption of C$9.0 million in net debt, according to a Sept. 10 news release.
As a result of the amendment, Iron Bridge's board recommended that its shareholders approve Velvet Energy's offer. The deal would provide "shareholders with a higher cash price for their shares, despite a challenging environment for Canadian oil and gas companies," Iron Bridge CEO Rob Colcleugh said.
All of Iron Bridge's board members, its officers and certain shareholders, who in total represent about 35% of the company's shares, agreed to tender their shares in favor of the new offer. The agreement also extended the expiration of the offer to Sept. 24.
Velvet Energy is a Calgary, Alberta-based producer with operations focused in the Deep Basin of Alberta. Iron Bridge Resources, also based in Calgary, is a pure-play Montney producer with an acreage position in Alberta.