Canadian 88 Scraps Morrison Takeover Bid

Canadian 88 Energy Corp, facing a hearing over alleged trading improprieties and a falling stock price, said it was scrapping its C$652 million ($482 million) hostile takeover bid for Morrison Petroleums Ltd.

The surprising turn follows Calgary-based Canadian 88's announcement Friday that it would extend the cash-and-stock offer to accommodate proceedings before securities regulators in connection with pre-bid trading in Morrison stock.

Canadian 88's original offer in the heated battle, which has been spiced with much mudslinging, expired Friday.

Canadian 88 chief executive Greg Noval, reached on Sunday at his ranch south of Calgary, said his firm dropped the cash-and-stock offer because it saw less value in Morrison, not over fear of reprisals from the Ontario and Alberta securities commissions.

 

Noval said he believed the commissions would have cleared Canadian 88 of wrongdoing over disclosure in bid documents of its relationship with private West Central Capital Corp and trading of Morrison shares by West Central in the days leading up to the offer.

"That disclosure had all been ironed out between our lawyers and the commissions," Noval said. "We're not pointing our finger at the commissions at all. We're pointing it at Morrison -- the value is not there."

The hearing before securities regulators, which had been scheduled for Monday in Toronto, was cancelled in light of Canadian 88 walking away from its bid, he said.

Noval stressed that Canadian 88 did not launch its bid to "make a quick flip on the stock." West Central acquired about 8 percent of Morrison shares before the bid using cash loaned by Canadian 88.

New information from scouts -- people hired to secretly glean data about competitors' operations -- about Morrison's natural gas exploration in the foothills of southern Alberta was the main factor behind scrapping the bid, he said. The data suggested a much-watched well was either dry or would yield little gas, Noval said. Foothills drilling acreage owned by Morrison was seen as the strategic key behind Canadian 88's bid. The region is known for potentially rich gas reserves and deep, complex and expensive drilling.

Morrison chief executive Gordon Stollery said Sunday he was not aware of any new exploration data that could lead to a termination of the bid and that he concluded uncertainty over the hearing was the main reason for the move.

Canadian 88 had offered C$10 cash ($7.40), to a maximum cash portion of C$140 million ($104 million), or 1.5 of its shares for each Morrison share.

But Canadian 88's share price fell over the past week as uncertainty over its bid intensified, lowering the value of the exchange. Canadian 88 stock closed Friday at C$5.40 ($4.00), down from C$6.75 ($5.00) when it announced the bid on Jan 13.

Besides the disclosure issues, the Ontario Securities Commission and Alberta Securities Commission were to determine whether all Morrison shareholders should be given the opportunity to sell their shares to Canadian 88 on at least the same cash terms as those afforded West Central in the time leading up to the bid announcement. Trading in stock related to the bid was halted late Thursday.

Analysts have said they believed one or more new bidders for Morrison were likely to emerge shortly. Morrison said it was keeping its proprietary data room open in hopes of attracting new suitors.