July 23, 2018 - 6:30 AM EDT
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Utica Resources Announces Revised Offer to Acquire Junex Inc.

Canada NewsWire

MONTREAL, July 23, 2018 /CNW/ - Utica Resources Inc. ("Utica") today announced that it has delivered to the Special Committee of the Board of Directors of Junex Inc. ("Junex") a revised offer (the "Offer") to acquire all of the outstanding common shares of Junex (the "Junex Shares"). Pursuant to the Offer, each shareholder of Junex would receive, for each Junex Share held, C$0.45 in cash (the "Cash Consideration") plus a contingent value right (the "CVR") entitling the holder thereof to receive a pro rata share, paid yearly in cash, of a royalty of 1.0% of revenue attributable to Junex's current working interest share (a 0.5287% overriding royalty) of the gross monthly production of all petroleum substances, after certain deductions, from Junex's Galt project (the "CVR Consideration"); the CVR would be redeemable by Utica at any time for an additional cash payment of C$0.10 per Junex Share (the "Utica Transaction"). The CVR is not contingent on anything other than the realization of the underlying revenues attributable to Junex's interest in the Galt project. Assuming the redemption or full realization of the value of the CVR up to its redemption price, the total consideration to Junex shareholders on an undiscounted basis (the "Total Consideration") would be C$0.55 per Junex Share. The Utica Transaction is subject to being completed by way of a plan of arrangement under the Business Corporations Act (Québec).

Utica believes that the Offer constitutes a "Superior Proposal" to the arrangement agreement dated June 8, 2018 (the "Arrangement Agreement") between Junex and Cuda Energy Inc. ("Cuda") for the announced transaction with Cuda (the "Cuda Transaction"). The Offer is subject to the termination of the Cuda Transaction as provided for in the Arrangement Agreement and the entering into of a new arrangement agreement between Utica and Junex that would be substantially similar to the Arrangement Agreement in terms of general provisions and construct, covenants, representations, warranties, conditions, and termination arrangements. The Utica Transaction is not subject to a confirmatory due diligence condition, nor is it subject to financing.

Utica expects to work collaboratively with Junex and its advisors in order to finalize the Utica Transaction and obtain shareholder approval in a timely fashion.

Value

Desjardins Capital Markets, financial advisor to Utica, has determined that the undiscounted value of the CVR exceeds C$0.10 per Junex Share, that the CVR Consideration is worth C$0.10 per Junex Share on an undiscounted basis and that the Total Consideration is C$0.55 per Junex Share on an undiscounted basis.

The Total Consideration of C$0.55 per Junex Share, on an undiscounted basis, represents (i) a premium of 52.1% over the 20-day volume-weighted average price of C$0.3615 for the Junex Shares on the TSX Venture Exchange ("TSXV") immediately prior to the announcement date of the Cuda Transaction; (ii) a premium of 48.6% over the deemed value of approximately C$0.37 per Junex Share for the Cuda Transaction, determined by calculating the deemed value of Junex Shares to be issued for the share portion of the proposed acquisition of Wyoming assets pursuant to the Cuda Transaction, as well as the deemed value of Junex Shares for the early conversion of convertible debentures pursuant to the Cuda Transaction; (iii) a premium range of 33.8% to 45.5% to the fair market value range of C$0.378 to C$0.411 for Junex Shares after taking into account the Cuda Transaction that was established by KPMG, as independent valuator to the Special Committee of the Board of Directors of Junex, in its fairness opinion (the "KPMG Opinion") contained in the joint management information circular of Junex and Cuda dated July 6, 2018 (the "Circular"); and (iv) a premium of 31.7% over the volume-weighted average price of C$0.4176 for the Junex Shares on the TSXV for the period commencing on June 12, 2018, the date immediately following the announcement of the Cuda Transaction, and ending on the last trading date immediately prior to the announcement by Junex of the original Utica offer on July 3, 2018.

The Offer is the second offer by Utica that provides cash consideration above the fair market value range of C$0.378 to C$0.411 for Junex Shares, taking into account the Cuda Transaction, that was established by the independent valuator to the Special Committee of the Board of Directors of Junex in the KPMG Opinion. Utica's previous offer that it made to the Special Committee of the Board of Directors of Junex on June 29, 2018 provided for either a cash consideration of C$0.42 per Junex Share or a cash consideration of C$0.40 per Junex Share plus the CVR Consideration and the revised Offer provides for the Cash Consideration of C$0.45 per Junex Share plus the CVR Consideration valued at up to an additional C$0.10 per Junex Share, on an undiscounted basis, for Total Consideration of C$0.55 per Junex Share, on an undiscounted basis.

Should Junex not come to the same conclusion as Utica, that the Offer of C$0.45 per Junex Share of Cash Consideration plus an additional C$0.10 per Junex Share of CVR Consideration, on an undiscounted basis, is clearly superior (a 33.8% to 45.5% premium) to the fair market value range of C$0.378 to C$0.411 for Junex Shares in the all-share Cuda Transaction, taking into account the Cuda Transaction, that was established by the KPMG Opinion (see paragraph 9 starting on page 12 of Appendix F in the Circular available on SEDAR at https://www.sedar.com/GetFile.do?lang=EN&docClass=10&issuerNo=00015378&issuerType=03&projectNo=02793873&docId=4350628), Utica would invite the Special Committee of the Board of Directors of Junex to outline to Junex shareholders the underlying valuation analysis supporting such conclusion.

For the shareholders of Junex, the Offer provides significant upfront cash consideration plus the potential to receive incremental cash consideration as a result of the upside participation on the Junex assets upon commercial development of the Galt project under the CVR; an immediate liquidity event at a fixed price; certainty of valuation compared to the Cuda Transaction; and an unconditional offer. 

Québec-Focused Strategy

Utica is a Québec-based private energy company. Utica sees long term potential in Junex's Québec assets and intends to stay invested in Québec for the long run. Utica's strategy will be to invest and grow in Québec, leveraging Utica's expertise, network of partners, relationships and community involvement. This network includes a long-standing relationship with Junex's management and employees. Utica anticipates working closely with the Junex team to create a leading position in oil and gas development in Québec.

Utica believes that its Offer holds additional benefits for the province of Québec as it plans on retaining the existing Junex team and will continue to operate as a private Québec-based oil & gas company, rather than a subsidiary of a Calgary-based public company focused on opportunities in other jurisdictions.

Outline of Benefits

Benefits to Junex shareholders:

  • A substantial premium to the value of the Cuda Transaction, as determined by KPMG, the independent valuator of the Special Committee of the Board of Directors of Junex
  • A substantial premium to both the unaffected prices of Junex prior to announcement of the Cuda Transaction and the market prices from the day following the announcement of the Cuda Transaction until announcement of Utica's original offer
  • Meaningful cash consideration of C$0.45 per Junex Share which provides liquidity at a fixed price
  • Certainty of valuation compared to the Cuda Transaction
  • Upside exposure to potential incremental cash consideration of up to C$0.10 per Junex Share from the CVR providing an overriding royalty on the Galt project
  • Unconditional offer

Benefits for Junex management team and employees, the Junex communities and the Province of Québec:

  • Planned retention of the Junex management team
  • Greater preservation of Québec jobs with Junex employees compared to the Cuda Transaction
  • Economic and social alignment with the communities in which Junex will operate
  • Junex would remain a private Québec-based oil & gas company rather than a subsidiary of a Calgary-based public company

Update to Early Warning Report

Lansdowne Partners Austria GmbH ("LPA") is the investment manager of Lansdowne Investment Company Cyprus Limited ("LICC"). LICC is an affiliate of Utica. LICC directly holds 8,750,000 Junex Shares and 4,375,000 common share purchase warrants. On the basis of 88,602,703 Junex Shares issued and outstanding (as disclosed in the Circular), LICC has beneficial ownership or direction over approximately 14.81% of the outstanding Junex Shares after giving effect to the exercise of the Warrants. LPA will update its early warning report dated July 4, 2018 (which updated its initial early warning report dated October 23, 2017) and a copy of such updated report will be available under Junex's profile on SEDAR at www.sedar.com. The address of LPA is Wallnerstrasse 3/21, 1010 Vienna, Austria.

Cautionary Note Regarding Forward Looking Statements

This news release contains forward-looking information and forward-looking statements (collectively, "forward-looking statements") within the meaning of Canadian securities legislation, including, without limitation: (i) statements regarding the intentions of Utica, LICC and LPA; (ii) the ability of the parties to reach an agreement regarding the proposed transaction, (iii) if an agreement is reached, the ability of the parties to complete the proposed transaction or the timing or terms thereof; and (iv) if a proposed transaction is completed, the ability of Junex to develop and operate its assets (including the Galt project) and generate revenues required to make CVR payments. Forward-looking statements can, but may not always, be identified by the use of words such as "expects", "intends", "proposed" and similar references to future periods or the negatives of these words and expressions. These statements are based on the stated intentions of the parties and currently available information. They are not guarantees of future events, are based upon assumptions that may not prove to be accurate, and involve certain risks and uncertainties that are difficult to predict, including the risk that no transaction will be agreed to, that completion of the transaction will be materially delayed or that, even if a transaction is agreed to, the transaction will not be completed. Investors are cautioned not to put undue reliance on forward-looking statements. Any forward-looking statement speaks only as of the date hereof, and the parties undertake no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Neither TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Utica Resources Inc.

View original content: http://www.newswire.ca/en/releases/archive/July2018/23/c4110.html

Utica Resources Inc., 1020 Rue Bouvier #475, Québec, Québec, G2K 0K9; Cabinet de relations publiques NATIONAL: Information: Stéphanie Arsenault Soucy, Tel: (418) 648-1233 ex. 1223, Email: sarsenault-soucy@national.caCopyright CNW Group 2018


Source: Canada Newswire (July 23, 2018 - 6:30 AM EDT)

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