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CALGARY, July 2, 2015 /CNW/ - SilverWillow Energy
Corporation (TSXV:SWE) ("SilverWillow" or the
"Company") announces that it has entered into a definitive
acquisition agreement (the "Acquisition Agreement") pursuant
to which Value Creation Inc. ("Value Creation") will acquire
all of the outstanding common shares of SilverWillow for cash
consideration of C$0.03 per share
(the "Transaction"). The Acquisition Agreement was
negotiated at arm's length between SilverWillow and Value
Creation.
The Transaction will be carried out by way of an amalgamation
between SilverWillow and a wholly-owned subsidiary of Value
Creation. The Transaction will require approval of 66 2/3% of
SilverWillow shareholders voting in person or by proxy at a special
meeting of SilverWillow shareholders to be called to consider the
Transaction (the "Meeting"), and a "majority of the
minority" as required by Multilateral Instrument 61-101 -
Protection of Minority Security Holders in Special
Transactions ("MI 61-101") after excluding the votes
cast in respect of SilverWillow common shares held by certain
persons as required to be excluded under MI 61-101.
All of the directors and officers of SilverWillow, together with
certain shareholders, holding in aggregate 37% of the outstanding
common shares, have entered into voting support agreements with
Value Creation pursuant to which they have agreed to hold their
common shares until the Meeting and to vote in favour of the
Transaction at the Meeting.
All of SilverWillow's outstanding stock options have an exercise
price above the per share consideration under the Acquisition
Agreement and accordingly are "out of the money". As a
result, the holders of the outstanding stock options have agreed to
terminate all such stock options. It is a condition to the
Acquisition Agreement that the aggregate amount payable to
executive officers and directors in respect of deferred directors'
fees, severance and change of control payments and payments under
SilverWillow's deferred share unit and restricted share under plans
be not more than C$400,000. In
order to facilitate the Transaction, the directors and officers of
SilverWillow have agreed to settle the amounts payable to them for
their proportionate share of the C$400,000 amount. Accordingly, each
director and officer has voluntarily agreed to receive at closing
only approximately 12% of the amount to which he would otherwise be
entitled.
Under the terms of the Acquisition Agreement, SilverWillow has
agreed that it will not solicit or initiate any inquiries or
discussions regarding any other business combination or acquisition
proposal, subject to the ability of SilverWillow's board of
directors (the "Board of Directors") to consider and respond
to unsolicited proposals in accordance with its fiduciary
duties. Each of SilverWillow and Value Creation has agreed to
pay the other an amount of C$500,000
as expense reimbursement in the event that the Acquisition
Agreement is terminated in certain circumstances.
Complete details of the terms of the Transaction are set out in
the Acquisition Agreement, which will be filed by SilverWillow
under its profile on SEDAR at www.sedar.com. In addition,
further information regarding the Transaction will be contained in
the information circular in respect of the Meeting which will be
filed on SEDAR when it is mailed to shareholders. All
shareholders are urged to read the information circular once it
becomes available, as it will contain additional information
concerning the Transaction. SilverWillow expects to mail the
information circular to holders of common shares by end of
July 2015 and hold the Meeting in
mid-August, 2015. The parties expect that the Transaction
will be completed shortly after the Meeting, subject to
satisfaction of all conditions to closing.
As the Company has communicated in its recent quarterly and
annual reports, it has faced significant challenges as a result of
changes to and uncertainty in the regulatory environment applicable
to Canadian oil sands companies generally and in relation to
companies with shallow SAGD projects in particular. These
challenges have been compounded by challenges arising from
restrictions by the Canadian federal government under the
Investment Canada Act with respect to investments by
state-owned enterprises in the Canadian oil sands sector, which may
have reduced investments in the sector. These challenges,
together with the difficult market conditions arising from the
recent decrease in commodity prices, have raised significant
questions as to the ability of the Company to develop its projects,
and with respect to the viability of the Company as a whole in the
long term. These types of challenges have led other companies
in the Company's industry sector to seek creditor protection or go
entirely dormant.
The Company has responded to the difficult circumstances in a
manner to protect shareholder value. In March of 2014, the
Company launched a process with its financial advisor, RBC Capital
Markets, to consider strategic alternatives for the Company and to
seek strategic initiatives to enhance the opportunities available
to the Company. In addition, in July and August of 2014, the
Company significantly reduced its operations, reducing staff down
to the executive officers who worked on a part-time basis and
agreed to defer payment of severance amounts to which they would
otherwise be entitled, and otherwise reduced costs significantly,
containing capital spending to those items that would directly
advance or add value to its projects. The Company has also
written down the value of its assets on more than one occasion to
reflect market conditions. Despite these initiatives, market
conditions have not improved and the prospects for the Company have
grown increasingly challenging as the Company's cash reserves have
dwindled and additional sources of new financing appear
elusive. Among other issues, certain significant liabilities
will become current liabilities beginning in August 2015, such that the Company expects to be
in a negative working capital situation at that time.
The Transaction represents a culmination of the lengthy process
pursuant to which SilverWillow has sought to protect value for its
shareholders and seek strategic alternatives amid the current
difficult economic and market conditions. RBC Capital Markets
approached numerous parties which would typically be expected to
have interest in the Company or its assets. Unfortunately,
due to the difficult market circumstances, including market
circumstances arising from low commodity prices, entities that
would be expected to have some interest in a transaction with the
Company have reduced their own capital spending significantly and
have not expressed interest in a transaction. Accordingly,
after this lengthy review, the proposal received by Value Creation
which led to the Acquisition Agreement represented the only
actionable opportunity which preserved some value for
shareholders. The Board of Directors, after considering
advice from its financial advisor with respect to current market
conditions and prospects available to the Company, has determined
that there is a significant risk that shareholders of the Company
may recover no value for their shares absent a transaction that is
completed while the Company is still solvent, and have determined
to proceed with the Transaction.
Although the Board of Directors is disappointed that the Company
could not achieve greater recovery of value for its shareholders,
and that the Transaction price per share represents a discount to
the current market price, it has determined that the Transaction is
the best way forward at this time given the current difficult
conditions and limited options available to the Company. The
Board of Directors has unanimously approved the Acquisition
Agreement and the Transaction, determined that the Transaction is
in the best interests of the Company and its shareholders, and
recommends to its shareholders that they vote in favour of the
Transaction at the Meeting.
About SilverWillow Energy
SilverWillow Energy is a Calgary,
Alberta-based pre-production oil sands company with a
portfolio of exploration leases in Canada's Athabasca oil sands. To learn more,
please visit www.swenergy.ca.
The TSX Venture Exchange has in no way passed upon the merits
of the proposed Transaction and has neither approved nor
disapproved of the contents of this news release.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES
PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX
VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR
ACCURACY OF THIS RELEASE.
Cautionary Statements Regarding Forward-Looking
Information
This news release contains "forward-looking information" within
the meaning of applicable securities laws. Forward-looking
information is frequently characterized by words such as "plan",
"expect", "project", "intend", "believe", "anticipate", "estimate"
and other similar words, or statements that certain events or
conditions "may" or "will" occur. The forward-looking information
in this news release relates, but is not limited to, statements
with respect to the potential acquisition of SilverWillow by Value
Creation, the ability of the parties to satisfy conditions to
closing, the timing for the dissemination of the information
circular for the Meeting and the date of the Meeting, and the
prospects for the Company absence the completion of the current
Transaction.
The forward-looking information set out in this news release, is
based on certain expectations and assumptions regarding, among
other things, the ability of the Company and Value Creation to
satisfy the conditions to the Transaction, the absence of material
adverse changes or other events which may give the parties a basis
on which to terminate the Acquisition Agreement, the ability of the
parties to complete the preparation of the information circular in
respect of the Meeting and hold the Meeting within the time frames
indicated, the absence of further changes and further economic
conditions which may otherwise effect the parties or the
Transaction.
Forward-looking information is subject to known and unknown
risks and uncertainties and other factors which may cause actual
results, events and achievements to differ materially from those
expressed or implied in such forward-looking information. Such
risks, uncertainties and factors include, among others, the risks
that the parties will not be able to complete the Transaction
within the time frame indicated or at all, the risk that events may
occur which give rise to a material adverse change or other event
which causes a party to terminate the Acquisition Agreement; risks
that the shareholders will not approve the Transaction; and risks
relating to the early stage of development of SilverWillow lands;
and the general risks associated with exploring for, developing and
producing bitumen, including many factors beyond the Corporation's
control, and no assurance can be given that the indicated level of
bitumen or the recovery thereof will be realized. In general,
estimates of bitumen are based upon a number of factors and
assumptions made as of the date on which the resource estimates
were determined, such as geological and engineering estimates,
which have inherent uncertainties.
Additional risks relating to the business and operations of
SilverWillow are set forth in the Company's most recent
Management's Discussion and Analysis, which are filed under the
Corporation's profile on SEDAR at www.sedar.com.
SilverWillow undertakes no obligation to update forward-looking
information if circumstances or management's estimates or opinions
should change except as required by law. The reader is
cautioned not to place undue reliance on forward looking
information.
SOURCE SilverWillow Energy Corporation