Market Snapshot
  • U.S.
  • Europe
  • Asia
Ticker Volume Price Price Delta
DJIA 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 2.54 0.14%
NASDAQ 4,095.52 9.29 0.23%
Ticker Volume Price Price Delta
STOXX 50 3,155.81 16.55 0.53%
FTSE 100 6,625.25 41.08 0.62%
DAX 9,409.71 91.89 0.99%
Ticker Volume Price Price Delta
NIKKEI 14,516.27 98.74 0.68%
TOPIX 1,173.37 6.78 0.58%
HANG SENG 22,760.24 64.23 0.28%

Major Shareholder Urges Wenzel Shareholders to Vote Against the Proposed Arrangement With Basin Tools, L.P.


Major Shareholder Urges Wenzel Shareholders to Vote Against the Proposed Arrangement With Basin Tools, L.P.

VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 07/24/13 -- Perlus Investment Management LLP announced by way of news releases issued on July 10, 2013 and July 22, 2013 its reasons for opposing the proposed business combination (the "Arrangement") involving Wenzel Downhole Tools Ltd. ("Wenzel") and Basin Tools, L.P. ("Basin"). We strongly encourage Wenzel's shareholders to read those news releases. In both releases, it was noted that the consideration of $2.25 per share for Wenzel shares was grossly inadequate and in no way reflects a fair value for Wenzel. Basin, the single largest shareholder of Wenzel, unilaterally initiated the process whereby Basin would acquire the balance of Wenzel at a significant discount to fundamental fair value. Two members of Wenzel's board, including its Chairman, are founding members of an affiliate of Basin and the non-executive chairman of Basin. It was Basin who initiated and orchestrated the strategic review process and it is Basin who is responsible for paying for the valuation and fairness opinion (the "Valuation") upon which the board of Wenzel is relying in order to fulfill their fiduciary obligation to act in the best interests of Wenzel shareholders and have arrogated that the consideration is fair. The Valuation has already been found to be incorrect post issuance, which subsequently forced an amendment to the information circular and postponement of the meeting. Perlus firmly believes that the Valuation remains critically flawed and has requested that Wenzel seek another valuation that would be transparently independent. Wenzel has ignored our requests. Basin also forced Wenzel to agree to a non-solicitation clause; this meant that Wenzel was effectively denied the latitude to explore or to even entertain alternative offers. As a consequence, Wenzel was limited to simply determining whether the consideration was fair by receipt of a Valuation commissioned as a result of a process initiated by Basin and paid for by Basin (the very definition of a compromised transaction); Basin clearly wants Wenzel and has gone to extraordinary measures to get it.

DON'T ALLOW BASIN TO STEAL YOUR COMPANY. VOTE AGAINST THE ARRANGEMENT.

It is implicitly clear from Perlus' prior news releases that the consideration is too low. In the Valuation, inappropriate comparative companies were used to determine a multiple, the working capital of Wenzel was deliberately discounted based on inaccurate assumptions and incorrect tax rates were used which overstated Wenzel's tax liabilities. All of this resulted in a range of values which substantially undervalued Wenzel.

We strongly urge you to ACT NOW and VOTE AGAINST the Arrangement. We believe that given the Arrangement as an alternative, the maximum value would be best achieved by keeping Wenzel public.

We are of the strong belief that Wenzel is in the beginning stages of a long term growth cycle. Not only have industry data points, such as the price of oil and proposed drilling activity trends improved since the Basin buyout proposal, but North American Oil/Gas Service public equity valuation multiples are now beginning to reflect this expected expansion. International demand for horizontal and directional drilling technology and the equipment necessary to efficiently extract resources is expanding at a rapid pace. On the international front, the majority of existing wells are still being drilled using old vertical based methods, which do not facilitate comprehensive access to the addressable resource and is ultimately highly cost inefficient when applied to new wells. Thus, international customers are actively seeking and procuring North American horizontal drilling methods and tools on many of their new on-land based projects. We believe Wenzel will be a prime beneficiary of these well-defined trends which should serve to generate significant, sustainable growth in both revenue and earnings in years to come. Not only has Wenzel recently hired a new international sales team to take advantage of this burgeoning opportunity, it has been working on the introduction and launch of major new products lines which are both adjunctive and complementary to its core mud motor business. Wenzel's renewed focus on international sales as well as these product introductions could, in theory, permit revenue to increase significantly in a few short years. Wenzel's business model, like many other tool manufacturers, contains operating leverage that should, in a growth environment, propel earnings at a significantly higher pace than that of revenue. This prospective growth in earnings, coupled with industry multiples that are now broaching 5.5x 2014 estimates would place Wenzel's stock at around a $3.50 level (using the 2014 EBITDA projection in the Valuation), a far cry from the $2.25 price Basin has proposed. It is no wonder Basin is seeking to buy Wenzel in advance of this potential growth and for such a parsimonious sum. Let us not forget, Basin originally paid $2.30 when it purchased its 37% stake in Wenzel. This was approximately a year prior to Wenzel's settlement with National Oilwell Varco, which arguably, at the time, represented a major overhang on Wenzel's stock price. With the lawsuit now definitively behind it and with a clear path for sustainable, superior growth looking forward, we urge fellow shareholders to turn down Basin's ludicrously low price offer.

Even if the pursuit of strategic alternatives is determined to be the best strategy, voting against the Arrangement does not preclude such strategic alternatives. It would simply allow for a more balanced approach as opposed to one dictated by the interests of one party. In the event that no other strategic alternative is found, then a transaction with Basin, supported by an independent valuation, could still be pursued.

Perlus Investment Management LLP and its affiliates, Perlus Microcap Fund L.P. and Perlus Limited (collectively, "Perlus") intend to vote against the Arrangement. Certain other institutional shareholders have also indicated they are voting against the Arrangement. Perlus urges other concerned Wenzel shareholders to do the same as follows:


 
1.  VOTE AGAINST the Arrangement using the form of proxy or voting
    instruction provided by Wenzel or by using the internet or telephone
    voting instructions provided by Wenzel in their meeting materials in
    connection with the adjourned meeting to be held in July 30, 3013. 
2.  If you have already voted for the Arrangement, revoke your prior proxy
    or voting instruction provide by Wenzel or by using the internet or
    telephone voting procedures set out in the Wenzel meeting materials. 
3.  The cutoff to submit your proxy or for internet or telephone voting is
    10:00 am (Calgary time) Friday, July 26, 2013. 
4.  Shareholders using internet or telephone voting can change their voting
    instructions more than once and at any time prior to the cutoff. 
5.  Do not appoint David LaSalle as your appointee. Leave blank or name
    another individual.

This solicitation is being made by Perlus and not by or on behalf of the management of Wenzel. Perlus received an exemption order from the Alberta Securities Commission that permits Perlus to solicit proxies by broadcast, speech or publication without sending an information circular to each Wenzel shareholder. The exemption order also permits Perlus to make certain non-public solicitations. Except for certain non-public solicitations, any solicitation will be made by broadcast, speech or publication. Perlus will bear all the costs and expenses associated with such solicitation. Perlus owns an aggregate of 3,413,500 Wenzel common shares ("Shares"), representing approximately 10.8% of the total Shares issued and outstanding as of the record date.

VOTE AGAINST the Arrangement using the form of proxy or voting instruction provided by Wenzel. Shareholders may subsequently revoke such proxy in any manner permitted by law. If you have previously voted on the form of proxy or voting instruction form sent to you by Wenzel, you may revoke your vote by voting on the internet, by fax, by mail or over the telephone (as available). ONLY YOUR LATEST DATED FORM OF PROXY OR VOTING INSTRUCTION FORM WILL BE COUNTED.

This solicitation relates to Wenzel Downhole Tools Ltd. whose address is 1200, 750-2 Street S.W., Calgary, Alberta T2P 4V5.

Forward-Looking Statements

Certain statements in this press release contain forward-looking information within the meaning of applicable securities laws in Canada ("forward-looking information"). The words "anticipates", "believes", "budgets", "could", "estimates", "expects", "forecasts", "intends", "may", "might", "plans", "projects", "schedule", "should", "will", "would" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words.

The forward-looking information in this press release includes, but is not limited to: the timing and holding of the Wenzel meeting and the future prospects of Wenzel. In connection with the forward-looking information contained in this news release, Perlus has made numerous assumptions. While Perlus considers these assumptions to be reasonable, these assumptions are inherently subject to significant uncertainties and contingencies. Additionally, there are known and unknown risk factors which could cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained herein.

All forward-looking information in this press release is qualified in its entirety by this cautionary statement and, except as may be required by law, Perlus undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof. Contacts: David LaSalle 805-379-0900 david@perlusinvestments.com

Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement