Calfrac Shareholders: Ten Important Things to Keep in Mind
CISCO, TX, Sept. 28, 2020 /PRNewswire/ - In response to the press release issued by Calfrac Well Services Ltd. ("Calfrac") (TSX: CFW) this morning, Wilks Brothers, LLC ("Wilks") offers ten key points for shareholders to keep in mind when considering Calfrac's Amended Management Transaction and Wilks' Premium Offer.
- Actions Speak Louder Than Words. Forced by Wilks' actions to amend the Management Transaction, Calfrac has admitted that shareholders were in fact entitled to much more value than they were being offered in the first iteration of the transaction; value that Calfrac insiders and a self-selected group of unsecured creditors attempted to appropriate for themselves. Shame on them.
- Cash is King and Gimmick - Free. Wilks' Premium Offer of $0.18 cash per Calfrac Share still provides shareholders with the highest and best value for their shares when compared with the amended Management Transaction. Calfrac had an opportunity to amend their Management Transaction and beat Wilks' Premium Offer. That task was simple. Their failure to do so speaks volumes. The amended Management Transaction offers a convoluted option to shareholders that is shackled by gimmicks and hard caps, which results in no more than $0.12 in cash per Calfrac Share, and pales in comparison to the $0.18 in cash per Calfrac Share that will paid directly to Shareholders by Wilks under the Wilks' Premium Offer. The advertised $0.15 per share under the amended Management Transaction will likely never happen.
- The Power Rests with the Shareholders. The Wilks' Premium Offer option has wrestled the power back into Shareholders' hands to decide their own fate. A direct path to a premium recovery requires that Shareholders vote down the amended Management Transaction and that the CBCA Court denies approval of the transaction at the final order hearing. A subsequent CCAA filing by Calfrac will not affect the Wilks' Premium Offer. To be clear, in order to remove any doubt as to the availability of the value offered by the Wilks' Premium Offer to shareholders, if the Management Transaction is not approved by shareholders and the CBCA Court denies approval of the transaction at the final order hearing, Wilks confirms that it will waive its condition that the Management Transaction be terminated.
- Follow the Yellow Brick Road. The Wilks' Premium Offer is the ONLY transaction that offers a premium recovery to Shareholders AND is actionable. The Wilks' Premium Offer does NOT require approval by Calfrac, its creditors or the Court. The Wilks' Premium Offer is made directly to Shareholders and is a contract between Wilks and Shareholders.
- Hope is Not a Strategy. No amount of Calfrac chest thumping will change the fact that the Amended Management Transaction will likely never be implemented. As structured, the transaction is conditional, and requires the consent of Second Lien Lenders, which will not be provided. Any attempt to side-step this requirement will be the subject of extensive litigation in the Courts. In addition, the Amended Management Transaction requires final Court approval, costly amendments and waivers from the first lien lenders (which have not yet been agreed to) and is also subject to a lengthy list of additional conditions precedent. Even if somehow the amended Management Transaction was implemented, the history of similar CBCA arrangements is not good: many have ended up in CCAA protection within months of completion, wiping out any remaining shareholder value. Mr. Mathison apparently thinks hope is a strategy telling the Globe and Mail on September 24, 2020 "you have to be a little bit of an optimist and hope that things improve in the industry". By contrast, the clearer path for Shareholders to a guaranteed recovery, entirely outside of the risks of the Court process, is the Wilks' Premium Offer.
- Clear and Present Danger. Both independent proxy advisory firms, Institutional Shareholder Services, Inc. and Glass Lewis & Co. have recommended that shareholders vote AGAINST the Management Transaction. Notably, immediately following the announcement of the Amended Management Transaction, analysts at Cormark Securities Inc. were quick to point out that the Amended Management Transaction continues to fall short of the value offered by Wilks and that "…with our expectation that pressure pumping will take several years to recover, we would expect Calfrac to enter into CCAA within 12-18 months should the management offer succeed." The experts have spoken, the amended Management Transaction is a bad deal for Calfrac and its stakeholders.
- Management Gets the Gold Mine. Shareholders get the Shaft. One of the matters that shareholders are being asked to vote on at the postponed meeting is a new "Omnibus Incentive Plan", a comprehensive suite of management incentives, which will replace the out-of-the-money incentives they have been granted and currently hold. So, in effect, management is asking to be rewarded for bringing the company to the verge of bankruptcy and massively diluting its loyal shareholder base. This demonstrates an absolute disregard for shareholders' interests.
- Options Create Value. Calfrac is disingenuous in stating that the amended Management Transaction is the only transaction available. This is not a Hobson's choice. The Wilks' Premium Offer creates options and the great thing about options is that they create value (See point 1). Calfrac can bury its head in the sand and pretend the Wilks' Premium Offer does not exist, but Calfrac cannot deny Shareholders the opportunity to earn the greatest premium on their investment.
- Shareholders Will Not be Threatened into Submission. Calfrac has now embarked on a direct campaign of attempting to threaten its shareholders with a CCAA filing and the promise of reduced recoveries if the amended Management Transaction is not approved in the CBCA process. This coercion will not work because a CCAA filing does not change the fact that the availability of the Wilks' Premium Offer does not depend on what Calfrac says or does next.
- This is Not a War. This is a Rescue Mission. What has been obscured by Calfrac's rhetoric and the flurry of litigation is that this is a debate about value, fairness and the best way to restructure Calfrac so that it can thrive in a highly competitive environment. In an interview with the Globe & Mail on Friday, September 24, 2020, Matt Wilks said that "If he'd [Mr. Mathison] put his guns down then we could do a lot of good for the stakeholders of Calfrac together". Matt Wilks meant it.
Calfrac Shareholders: The only path to protect your interests today is by voting AGAINST the Management Transaction. Vote the BLUE Proxy AGAINST the Management Transaction.
The deadline to submit your BLUE proxy is October 13, 2020 at 11:59 p.m. MST.
If you have already voted AGAINST the Management Transaction using the BLUE proxy, you do not need to do anything further and we thank you for your support.
If you have yet to vote or want to change your vote, you are encouraged to vote using only the BLUE proxy. Please disregard any other proxies you receive. If you have already submitted a proxy solicited by Management, you may still change your vote and protect your economic interests by voting your BLUE proxy today. The later dated proxy will supersede any earlier proxy submitted.
Need help voting? Please contact Laurel Hill Advisory Group as noted below.
QUESTIONS/ VOTING/ TENDERING ASSISTANCE
Shareholders who have questions or require voting or tendering assistance, may contact our communications advisor, proxy solicitation agent, information agent and depositary, Laurel Hill Advisory Group, by phone, toll-free at 1-877-452-7184 (North America) or +1-416-304-0211 (outside North America) or by e-mail at [email protected].
THIS ANNOUNCEMENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM PART OF THE OFFER OR AN INVITATION TO PURCHASE, OTHERWISE DISPOSE OF OR A SOLICITATION OF AN OFFER TO SELL, ANY SECURITY. WILKS HAS FILED A TAKE-OVER BID CIRCULAR AND RELATED MATERIALS WITH VARIOUS SECURITIES COMMISSIONS IN CANADA PURSUANT TO WHICH THE OFFER IS MADE. THE TAKE-OVER BID CIRCULAR CONTAINS IMPORTANT INFORMATION ABOUT THE OFFER AND SHOULD BE READ IN ITS ENTIRETY BY CALFRAC SHAREHOLDERS AND OTHERS TO WHOM THE OFFER IS ADDRESSED. CALFRAC SHAREHOLDERS (AND OTHERS) WILL BE ABLE TO OBTAIN, AT NO CHARGE, A COPY OF THE OFFER TO PURCHASE, TAKE-OVER BID CIRCULAR AND VARIOUS ASSOCIATED DOCUMENTS ON THE SYSTEM FOR ELECTRONIC DOCUMENT ANALYSIS AND RETRIEVAL (SEDAR) AT WWW.SEDAR.COM. THE OFFER WILL NOT BE MADE IN, NOR WILL DEPOSITS OF SECURITIES BE ACCEPTED FROM A PERSON IN, ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, WILKS MAY, IN ITS SOLE DISCRETION, TAKE SUCH ACTION AS IT DEEMS NECESSARY TO EXTEND THE OFFER IN ANY SUCH JURISDICTION.
Wilks is relying on the exemption under section 9.2(4) of National Instrument 51-102 - Continuous Disclosure Obligations and exemptive relief provided by the Alberta Securities Commission in an Order dated August 4, 2020 (the "Order") to make this public broadcast solicitation. The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations. This solicitation is being made by Wilks, and not by or on behalf of the management of Calfrac. Wilks has engaged Laurel Hill Advisory Group to act as our communications advisor and proxy solicitation agent.
Based upon publicly available information, Calfrac's registered office is at 4500, 855-2nd Street S.W. Calgary, Alberta, Canada, T2P 4K7, and its head office is at 411-8th Avenue S.W. Calgary, Alberta, Canada, T2P 1E3. Wilks is soliciting proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws (including the Order), conveyed by way of public broadcast, including press release, speech or publication, and by any other manner permitted under applicable Canadian laws. In addition, this solicitation may be made by mail, telephone, facsimile, email or other electronic means as well as by newspaper or other media advertising and in person. All costs incurred for the solicitation will be borne by Wilks.
Wilks and Dan and Staci Wilks together hold 28,720,172 Common Shares, representing approximately 19.78% of the issued and outstanding Common Shares of Calfrac on the basis of Calfrac's disclosure in its management information circular dated August 17, 2020. that there are 145,616,827 Common Shares outstanding.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain information in this Press Release may constitute "forward-looking information", as such term is defined in applicable Canadian securities legislation, about the objectives of Wilks as they relate to Calfrac. All statements other than statements of historical fact may be forward-looking information. Forward-looking information is often, but not always, identified by words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions.
Material factors or assumptions that were applied in providing forward-looking information include, but are not limited to: the intention of Wilks to make a formal take-over bid for the shares of Calfrac and the results of such bid; that required regulatory approvals will be obtained on terms satisfactory to Wilks; the reaction of Calfrac's Board and management to the Bid; the response to and outcome of any applications to Courts or regulators relating to the transactions described herein or otherwise that may be made by or against Calfrac or Wilks; the intention of Wilks to apply to securities regulators for discretionary relief from certain statutory requirements applicable to the bid and the results of such application.
Forward-looking information contained in this Press Release reflects current reasonable assumptions, beliefs, opinions and expectations of Wilks regarding future events and operating performance of Calfrac and speaks only as of the date of this Press Release. Such forward-looking information is based on currently publicly available competitive, financial and economic data and operating plans and is subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Calfrac, or general industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Many other factors could also cause Calfrac's actual results, performance or achievements to vary from those expressed or inferred herein, including, without limitation, the success of the proposed Wilks' Premium Offer, the reaction of the market and Calfrac's shareholders, creditors and customers to the Wilks' Premium Offer, the impact of legislative, regulatory, competitive and technological changes; the state of the economy; credit and equity markets; the financial markets in general; price volatility; interest rate and exchange rate fluctuations; general economic conditions and other risks involved in the hydraulic fracking industry. The impact of any one factor on a particular piece of forward-looking information is not determinable with certainty as such factors are interdependent upon other factors, and Wilks' course of action would depend upon its assessment of the future considering all information then available.
Should any factor affect Calfrac in an unexpected manner, or should any assumptions underlying the forward-looking information prove incorrect, the actual results or events may differ materially from the events predicted. All of the forward-looking information reflected in this Press Release is qualified by these cautionary statements. There can be no assurance that the results or developments anticipated by Wilks will be realized or, even if substantially realized, that they will have the expected consequences for Calfrac, Calfrac's shareholders or Wilks. Forward-looking information is provided, and forward-looking statements are made as of the date of this Press Release and except as may be required by applicable law, Wilks disclaims any intention and assumes no obligation to publicly update or revise such forward-looking information or forward-looking statements whether as a result of new information, future events or otherwise. Nothing herein shall be deemed to be an acknowledgement or acceptance by Wilks that the terms of the amended Management Transaction are legally permissible, appropriate or capable of implementation.
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SOURCE Wilks Brothers, LLC.