Ensign Goes Hostile in $358 Million Trinidad Drilling Bid

(Bloomberg) -- Ensign Energy Services Inc. went hostile with a roughly C$470 million ($358 million) cash bid for Trinidad Drilling Ltd. after objecting to the terms of a confidentiality agreement the rival oilfield-service company wanted it to sign to engage in negotiations.

Trinidad’s demand for “a lengthy standstill provision” wasn’t in the best interest of shareholders, Calgary-based Ensign said Monday. Standstill agreements can be used to stall a bidder’s purchase of the target’s stock, hampering the process of an unsolicited takeover.

Ensign’s bid comes less than two weeks after Trinidad ended a strategic review by saying that the offers it received didn’t fully value the company and that its best alternative was to execute its five-year strategic plan. Ensign, which said it already owns about 9.8 percent of Trinidad’s stock, said the “failed” review process shows a lack of other viable alternatives for Trinidad’s investors to reap an immediate premium on their shares.

Calgary-based Trinidad said it received Ensign’s proposal on Saturday and determined the following day, after consulting with advisers, that it wasn’t in the company’s or shareholders’ best interests. Trinidad said it hasn’t received a formal offer from Ensign, but will consider it if one is received. The company is advising shareholders not to take any action until they receive further communication from the board.

Ensign Bid

Ensign said its cash offer of C$1.68 a share represents a 20 percent premium to the volume-weighted average price in the trading days since Trinidad announced the end of its strategic review. Trinidad advanced 16 percent to C$1.75 at 3:20 p.m. in Toronto, surpassing the offer price and suggesting some investors expect a higher bid. Ensign rose 5 percent to C$6.25.

While the offer has attractive components, the bid also is opportunistic given the discount Trinidad’s shares have been trading at, said Greg Colman, an analyst at National Bank of Canada Financial Inc. Shareholders may want an equity component so they can benefit from a rebound in the oilfield-services business, and a final deal at or above the current offer would be “reasonable,” he said in a note.

“The $1.68-a-share is now a floor price for Trinidad, and there is a possibility that a competing bid emerges, or shareholders look to squeeze out a few more pennies of economic rent,” Colman said.

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