Pacific Rubiales bonds slump as acquisition pulled

Mexico’s Alfa SAB and partner Harbour Energy Ltd dropped their plans for the acquisition of Pacific Rubiales Energy Corp after the driller’s largest shareholder turned down a takeover offer once valued at as much as $1.7 billion. Analysts cut their target price for the shares from the C$6.50 bid price to as low as C$0.25 amid concern the company will struggle to survive without a new buyer.

“The early proxy returns suggested that a significant number of shares would be voted against our proposal”, Harbour Energy Chief Executive Officer Linda Cook said in a joint statement with Alfa.

The opposition was led by O’Hara Administration Co, whose mostly South American allies controlled 19.8 per cent of the stock and had complained that the offer undervalued Pacific Rubiales. “Our offer of C$6.50 ($5.11) per share was full, fair and final, and therefore we have no plans to revise the proposal”.

The deal had been opposed by O’Hara Administration Co, whose holders own 20 percent of Pacific Rubiales and had launched a proxy fight to block the deal, urging other investors to vote against the offer.

A special shareholder meeting and vote on the offer was scheduled for July 28, but has been cancelled accordingly.

Toronto and Colombia-listed Pacific Rubiales is Colombia’s largest independent oil and gas producer.

Pacific Rubiales said it will have no further material obligations to Alfa and Harbour Energy with the termination of the deal, with immediate effect, including any termination/break fee or expense reimbursement.

Harbor is joint-owned by Asian commodity trader Noble Group and private equity firm EIG Global Energy Partners.

“The company will continue with its plans to reduce operating costs, divest non-core assets, reduce debt and continue to pursue Mexico Energy opportunities with…”

As for investors, they headed for the hills: the shares were off by more than $2 and are now trading in the $3 range.