• Petroteq shareholders to receive C$0.74 in cash per common share
• Offer represents a premium of 279% over the most recent TSX-V closing price and a 1,032% premium over the TSX-V volume weighted average price for the 52 weeks preceding the German purchase offer announced in April
• All-cash Offer provides full and certain value and liquidity for all shareholders
• Offer enables shareholders to avoid significant risks with the status quo
Viston United Swiss AG (“Viston”) and its indirect, wholly-owned subsidiary, 2869889 Ontario Inc. (the “Offeror”) announced that the Offeror has commenced a formal offer (the “Offer”) to acquire all of the issued and outstanding common shares (the “Common Shares”) of Petroteq Energy Inc. (“Petroteq”).
The Offer to Purchase and Circular (the “Offer to Purchase and Circular”) and related documents were mailed to Petroteq shareholders (“Shareholders”) on October 25, 2021 and the Offer commenced the same day.
Under the terms of the Offer, Shareholders will receive C$0.74 in cash for each Common Share. The Offer represents a significant premium of approximately 279% based on the closing price of C$0.195 per Common Share on the TSX-V on August 6, 2021, being the last trading day prior to the issuance of a cease trade order by the Ontario Securities Commission (“OSC”) at which time the TSX-V halted trading in the Common Shares. The Offer also represents a premium of approximately 1,032% to the volume weighted average trading price of C$0.065 per Common Share on the TSX-V for the 52-weeks preceding the German voluntary public purchase offer in April. The Offer is open for acceptance until 5:00 p.m. (Toronto time) on February 7, 2022, unless the Offer is extended, accelerated or withdrawn by the Offeror in accordance with its terms.
Benefits of the Offer
The Offeror believes that the Offer is compelling, and represents a clearly superior alternative to continuing on the course set by the current Petroteq board of directors and management team, for reasons that include the following:
• Premium to market price. The Offer represents a significant premium of 279.49% based on the closing price of C$0.195 per Common Share on the TSX-V on August 6, 2021 (the last trading day prior to the announcement by Petroteq of the cease trade order issued by the OSC at which time the TSX-V halted trading in the Common Shares. The Offer also represents a premium of 1,031.75% to the volume weighted average trading price of C$0.065 per Common Share on the TSX-V for the 52-week period prior to April 15 2021 (the last trading day prior to the publication of a voluntary public purchase offer in the German Federal Gazette).
• Liquidity and certainty of value. The Offer provides 100% cash consideration for the Common Shares, giving Shareholders certainty of value and immediate liquidity in the face of volatile markets and against a backdrop of historically poor performance of Petroteq shares.
• The status quo leaves Shareholders with considerable risk. If the Offer is not successful and no competing transaction is made, the Offeror believes it is likely the trading price of the Common Shares will decline to significantly lower levels. Petroteq has never been profitable and currently has limited cash to fund capital projects and debt obligations.
• Project execution and development risk. The Offeror believes that the Offer provides Shareholders with the value inherent in Petroteq’s portfolio of projects, including the oil extraction plant, without the long-term risks associated with the development and execution of those projects.
• The Petroteq board and management team have driven a significant destruction of shareholder value. The current leadership team has demonstrated an inability to increase earnings or achieve profitability, having accumulated losses of US$97 million since inception, a working capital deficit of US$13 million and nearly US$20 million of total debt. There is a risk of significant dilution to Shareholders, given that, as of May 31, 2021, outstanding options, warrants and convertible debentures were exercisable for/convertible into a total of 207,360,625 Common Shares, and that Petroteq has disclosed that it intends to issue further convertible securities and Common Shares in order to finance its operations and developments. Further issuance of Common Shares in this way will have a dilutive effect on the percentage ownership held by holders of its Common Shares. Viston believes this is a direct result of several poor strategic capital allocation decisions.
These and other benefits of the Offer to Shareholders are described in more detail in the Offer to Purchase and Circular.
Through its representatives, Viston made attempts to engage in discussions with the Petroteq Board, including an initial outreach through counsel on July 22, 2021, followed by the sharing of proof of funds for the Amended German Offer on August 24, 2021, and the entering into of a confidentiality agreement effective September 17, 2021, which disclosed Viston’s identity. In light of the significant premium being offered for the Common Shares, the Offeror expected that the Petroteq Board would accept Viston’s invitation to negotiate with a view to delivering value to its Shareholders but no progress was made.
Offer Details
The Offer is subject to specified conditions being satisfied or waived by the Offeror. These conditions include, without limitation: at least 50% +1 of the outstanding Common Shares on a fully diluted basis being validly deposited under the Offer and not withdrawn; the Offeror having determined, in its reasonable judgment, that no Material Adverse Effect exists; and receipt of all necessary regulatory approvals.
The Offer is not subject to a financing condition. The Offeror intends to fund the Offer from cash resources available to Viston, who has secured, on a firm, committed basis, up to EUR 420 million to fund the consideration payable for the Common Shares and to complete the transaction.
All cash payments under the Offer will be made in Canadian dollars; however, a Shareholder can elect to receive payment in U.S. dollars by checking the appropriate box in the Letter of Transmittal.
The Offeror encourages Shareholders to read the full details of the Offer set forth in the Offer to Purchase and Circular, which contains the full terms and conditions of the Offer and other important information, as well as detailed instructions on how Shareholders can tender their Common Shares to the Offer.