EQU - Montclair Energy Publishes Alternative Proposal to Maximize Equal Energy Shareholder Value

Montclair files $6/sh dutch tender & leveraged recapitalization proposal; Says proposal provides $7-10/share of value

Lawndale considering Montclair’s proposal, or one like it, over Equal’s current $5.43/share buyout agreement with Petroflow.

On April 11, 2014, Montclair Energy (“Montclair”) filed proxy soliciting materials with the SEC opposing Equal Energy’s (NYSE-EQU) (“Equal”) proposed acquisition by Petroflow Energy for US$5.43 per Equal share and offering an alternative proposal.  

Montclair’s filing sets forth a proposal calling for a $6/share dutch tender retiring 17.5MM EQU shares (48% of total outstanding), while leaving approximately 18.6MM EQU shares (52% of total outstanding) publicly trading. Montclair estimates that the valuation range of an optimally managed Equal and its much smaller share count would result in a post-recap price range for EQU shares of $7.95-$13.70/share. Montclair further estimates the resulting combined value from the mix of 48% tender and 52% ‘stub’ equity approximates $7.01-$9.97/share.

Lawndale Capital Management, LLC and its affiliate funds (“Lawndale”), one of Equal’s largest shareholders, previously criticized Montclair’s lower-priced unsolicited bids for the complete takeover of Equal and also expressed concern with Equal’s agreement to be bought out by Petroflow for only $5.43/share vs. higher value alternatives Lawndale felt were available.  Since one of the higher value alternatives Lawndale suggested Equal’s board pursue was a $6/share dutch tender and leveraged recapitalization, quite similar to what Montclair is now proposing, Lawndale is gratified of the validation of its analysis.  

Lawndale is giving serious consideration to favoring Montclair’s proposal, or one like it, over Equal’s current $5.43/share buyout agreement with Petroflow.  

April 11, 2014 Montclair Energy release and filing announcing its opposition to Equal’s $5.43/share sale to Petroflow Energy and proposing a levered share repurchase it feels would provide $7.01-$9.97/share of value to Equal shareholders

Montclair Energy Publishes Proposal to Maximize Shareholder Value at Equal Energy Ltd.
http://www.prnewswire.com/news-releases/montclair-energy-publishes-proposal-to-maximize-shareholder-value-at-equal-energy-ltd-254914791.html

SEC 14A proxy soliciting material filing –
Montclair Energy Proposal to Maximize Shareholder Value at Equal Energy Ltd.
http://www.sec.gov/Archives/edgar/data/1492832/000118811214000985/t78956_dfan14a.htm

Chronology of recent events

April 3, 2013 Lawndale Capital Mgmt release and letter opposed to Montclair Energy’s early 2013 unsolicited $4/share takeover bid  
Lawndale Capital Management Sends Letter to Equal Energy Board Regarding Montclair Offer
http://seekingalpha.com/article/1316981-lawndale-capital-management-sends-letter-to-equal-energy-board-regarding-montclair-offer

December 9, 2013 Equal Energy’s release announcing definitive agreement to be acquired for $5.43/share by Petroflow Energy and summary terms
Equal Energy Enters Definitive Agreement to be Acquired by Petroflow Energy
http://www.prnewswire.com/news-releases/equal-energy-enters-definitive-agreement-to-be-acquired-by-petroflow-energy-235026761.html

December 10, 2013 release by Lawndale Capital Management, a 4.8% EQU shareholder
Lawndale Capital Management Expresses Concerns Over Equal Energy Sale Agreement
Requests More Thorough Disclosure And Scrutiny Of Equal’s Strategic Alternatives Process
http://www.prnewswire.com/news-releases/lawndale-capital-management-expresses-concerns-over-equal-energy-sale-agreement-235225931.html

December 10, 2013 – Equal Energy 8-K exhibit 2.1 – the “Arrangement Agreement”
Acquisition Agreement between Equal Energy and Petroflow Energy
http://www.sec.gov/Archives/edgar/data/1492832/000119312513467930/d640337dex21.htm

December 31, 2013 – Equal Energy Preliminary Merger Proxy on form PREM14A
Equal Energy Preliminary Information Circular And Proxy Statement
http://www.sec.gov/Archives/edgar/data/1492832/000119312513488610/d652249dprem14a.htm

March 17, 2014 – Equal Energy 2013 10-K
Equal Energy Announces Fourth Quarter and Full Year 2013 Results;
Files 2013 10-K and 2013 Year End Reserves Report
http://www.sec.gov/Archives/edgar/data/1492832/000119312514102573/d651336d10k.htm

March 17, 2014 – Equal Energy 2013 10-K Exhibit 99.1
Equal Energy Jan 1, 2014 Energy Reserves Report
http://www.sec.gov/Archives/edgar/data/1492832/000119312514102573/d651336dex991.htm

For further information contact:

Andrew Shapiro
President
Lawndale Capital Management, LLC
591 Redwood Highway #2345
Mill Valley, CA 94941
phone- 415-389-VALUE (8258)
e-mail- [email protected]
Follow Andrew Shapiro on Seeking Alpha: http://seekingalpha.com/author/andrew-shapiro