Hammerhead Energy Inc. ("Hammerhead") is pleased to announce that it has entered into a definitive arrangement agreement (the "Arrangement Agreement") with Crescent Point Energy Corp. (“Crescent Point”) pursuant to which Crescent Point has agreed to acquire all of the issued and outstanding Class A common shares of Hammerhead ("Hammerhead Shares") for total consideration of C$21.00 per Hammerhead Share (the "Purchase Price"). The proposed transaction (the "Transaction") is to be completed by way of a plan of arrangement under the Business Corporations Act (Alberta) and is expected to close in late December 2023.
Pursuant to the Transaction, each Hammerhead Share will be exchanged for C$15.50 of cash consideration and C$5.50 in value in the form of common shares of Crescent Point, based on the offering price of the concurrent equity offering announced by Crescent Point.
Scott Sobie, President and CEO of Hammerhead notes “We are exceptionally proud of having built a business that has proven to be a top tier asset that has delivered significant organic growth. A combination of asset quality, exceptional people and a solid business plan has positioned the company to be an attractive acquisition target that will benefit from a lower cost of capital inside of a larger enterprise. Since going public in early 2023, we have delivered attractive equity returns for our shareholders, and the ability to maintain a share position in Crescent Point provides our shareholders with the ability to benefit from the continued growth of the business.”
Robert Tichio, Chairman of the Board of Hammerhead notes “On behalf of my fellow Board members and all shareholders, I want to personally congratulate the Hammerhead team for the exceptional performance they have delivered over many years that has resulted in this excellent outcome. Riverstone first invested in Hammerhead in 2014 as a 1,100 boe/d producer, and subsequently invested additional capital over the last nine years to support the company’s leadership, their skills, and these assets. The delivery of superior operational and financial results for all shareholders is a testament to our management team partners and all Hammerhead employees.”
Strategic Rationale:
- Attractive Value for Hammerhead Shareholders. The Purchase Price implies an enterprise value for Hammerhead of approximately C$2.55 billion, inclusive of assumed net debt. This represents a 17% premium over the five-day volume weighted average trading price of the Hammerhead Shares based on trading on all exchanges as of the close of markets on November 3, 2023.
- Continued Upside Exposure: The Transaction also provides Hammerhead shareholders with continued ownership in Crescent Point, a leading Canadian producer offering an attractive total return to shareholders through return of capital and growth. Crescent Point ownership offers enhanced scale, asset diversification, liquidity in financial markets and a long-term sustainable return of capital framework underpinned by a deep portfolio of high-quality inventory.
- Increasing Size and Scale: The Transaction will create the seventh-largest E&P in Canada with production weighted 65% to oil and liquids. Pro-forma Crescent Point production is expected to total over 200,000 boe/d in 2024, with significant drilling inventory in place to deliver additional long-term organic growth. Crescent Point will immediately become the largest owner of land in the volatile oil fairway in the Alberta Montney, in addition to already controlling the largest amount of land in the condensate-rich Kaybob Duvernay play. This increased scale is expected to allow Crescent Point to continue to improve its cost of capital.
Transaction Approvals:
Hammerhead will seek approval of the Transaction by its shareholders (the "Hammerhead Shareholders") at a special meeting expected to be held in late December 2023 (the "Meeting").
The Transaction is subject to customary closing conditions, including receipt of court approval, Hammerhead Shareholder approval by at least 66 2/3% of the votes cast at the Meeting and customary regulatory and stock exchange approvals, including under the Competition Act (Canada). Upon closing of the Transaction, the Hammerhead Shares will be de-listed from the TSX and NASDAQ.
Certain affiliates of Riverstone Holdings LLC (collectively “Riverstone”), who own in aggregate approximately 82% of the Hammerhead Shares (on a non-diluted basis), have entered into voting support agreements with Crescent Point and have agreed to support and vote in favor of the Transaction, subject to the provisions of such support agreements.
All of the directors and executive officers of Hammerhead have also entered into voting support agreements pursuant to which they have agreed, among other things, to vote their Hammerhead Shares in favour of the Transaction, subject to the provisions of such support agreements.
The Arrangement Agreement includes customary deal protection provisions, including that Hammerhead has agreed not to solicit or initiate any discussions regarding any other transaction, subject to customary "fiduciary out" rights to respond to a superior proposal. Hammerhead has also granted Crescent Point a right-to-match any superior proposal and will pay a termination fee of C$85 million to Crescent Point if the Arrangement Agreement is terminated in certain circumstances. Crescent Point has also agreed to pay a termination fee of C$85 million to Hammerhead if the Arrangement Agreement is terminated in certain circumstances.
Further details with respect to the Transaction will be included in the information circular to be mailed to the Hammerhead Shareholders in connection with the Meeting. A copy of the Arrangement Agreement, the voting support agreements and the information circular will be filed on Hammerhead's SEDAR+ profile and will be available for viewing at www.sedarplus.ca.
Recommendation of the Board and Special Committee:
Based on the unanimous recommendation of the Special Committee of the Hammerhead Board of Directors, which was comprised solely of independent directors and did not include any directors associated with Riverstone or management, the Fairness Opinions (as defined below) and consultations with its financial and legal advisors, among other considerations, the Hammerhead Board of Directors has unanimously: (i) determined that the Transaction is fair to Hammerhead Shareholders and in the best interests of Hammerhead; and (ii) resolved to recommend that the Hammerhead Shareholders vote in favour of the Transaction.
Advisors:
CIBC Capital Markets (“CIBC”) is acting as Financial Advisor to Hammerhead. CIBC has also provided a verbal opinion (“CIBC Fairness Opinion”) to Hammerhead’s Board of Directors to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be received by Hammerhead Shareholders pursuant to the Arrangement Agreement, is fair from a financial point of view, to Hammerhead Shareholders. Burnet Duckworth & Palmer LLP is acting as Canadian counsel to Hammerhead and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as U.S. counsel to Hammerhead. ATB Capital Markets and Stifel Canada are acting as Strategic Advisors to Hammerhead.
Peters & Co. Limited (“Peters & Co.”) is acting as Financial Advisor to the Special Committee of the Hammerhead Board of Directors. Peters & Co. has also provided a verbal opinion (“Peters & Co. Fairness Opinion” and, together with CIBC Fairness Opinion, the “Fairness Opinions”) to the Special Committee of the Hammerhead Board of Directors to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be received by Hammerhead Shareholders pursuant to the Transaction, is fair from a financial point of view, to Hammerhead Shareholders. Blake, Cassels & Graydon LLP is acting as counsel to the Special Committee of the Hammerhead Board of Directors.
Bennett Jones LLP and Vinson & Elkins LLP are acting as counsel to Riverstone.
