Dome’s light at the end of the tunnel

D'ARCY JENISH November 30 1987

Dome’s light at the end of the tunnel

D'ARCY JENISH November 30 1987

Dome’s light at the end of the tunnel

Canadian and foreign bankers were threatening to reject the proposed sale. But in Calgary, officials from Amoco Canada Petroleum Co. Ltd. were quietly proceeding with their $5.1-billion takeover of Dome Pe-

troleum Ltd. By the end of June both companies had launched a newsletter to their employees titled Merger News. Since then Dome and Amoco have set up 80 committees, involving some 435 employees, to work on integrating the two companies. While that happened, most of Dome’s creditors remained publicly opposed to the offer, maintaining that the price was too low. But last week, on Nov. 17, Amoco raised its offer to $5.5 billion, and several of Dome’s largest creditors quickly announced that they were dropping their opposition to the deal. As a result, the biggest takeover ever in Canadian industry, originally announced last April, finally appeared to be falling into place. Said Amoco president T. Don Stacy: “The lenders were more difficult to bring to the table than we thought. Maybe we were just naïve.”

If all the creditors approve the sale within the next couple of weeks, it could be completed by March at the earliest, Stacy said. And with creditor opposition crumbling, it has become increasingly unlikely that new bidders will emerge to obstruct the Amoco offer. Imperial Oil Ltd. and TransCanada PipeLines Ltd. (TCPL), two Toronto-based companies that bid on Dome earlier this year, are now both involved in other takeovers.

The conclusion of the Dome-Amoco deal could strengthen the Alberta oil and gas industry, according to some Calgary energy analysts. Dome owns the exploration rights to several million

acres of land—one of the largest claims in the industry. But because of its enormous $6.3-billion debt load, Dome has drastically reduced its exploration and development spending over the past five years.

Dome’s creditors fall into two gener-

al categories: those who are secured and have first claim on the assets; and those who are unsecured, most of whom loaned money to Dome during the company’s boom years in the 1970s and early 1980s without demanding any collateral. Under the new Amoco offer,

Dome’s secured lenders, who are owed $3.4 billion, would receive cash and securities representing 95.4 cents on each dollar owed, an increase from the original 88.5

cents. The unsecured lenders, owed total of $2.1 billion, would get 45 cents on the dollar, compared with 35.7 cents in the earlier offer. But Amoco has not improved its offer to Dome shareholders. Owners of common shares will receive $1.50 a share, compared to recent market prices of about $1. But the stock once traded as high as $25. Said Stacy: “This is absolutely our final offer. We have reached the end.”

Last week’s amended offer was the result of six months of intense negotiations involving Amoco, Dome and its 56 major creditors. While the talks were in progress, the Bank of Montreal, one of the largest secured creditors with about $800 million in loans, unsuccessfully sought an order in the Alberta Court of Queen’s Bench to force Dome to entertain bids from other companies.

But Bank of Montreal spokesman Brian Smith said that because of the improved offer the institution has signed an agreement in principle with Amoco. The bank also plans to adjourn its appeal of the Alberta Court’s ruling. The Toronto-Dominion Bank and the Canadian Imperial Bank of Commerce, both of which are major secured lenders, also announced their agreement in principle while the Royal Bank, the fourth major Canadian secured creditor, remained uncommitted. A fivemember committee representing 22 unsecured lenders also supported the new offer. Said committee chairman Peggy Peckham, a vice-president of New York-based Chase Manhattan Bank: “I think it looks pretty positive.”

At Imperial Oil, external affairs manager Dennis Baxter said that his company would still consider making an offer if Amoco was unsuccessful in its bid. But last month Imperial announced its $680-million purchase of Calgary-based Sulpetro Ltd. and affili-

ate Sulbath Exploration Ltd., an oil and gas producer that was in receivership. Dome’s other major potential suitor, TCPL, revealed on Nov. 13 that it was trying to take over Calgary-based Encor Energy Corp. Inc. Dome owns 37 per cent of Encor’s shares.

The new Amoco offer still needs final approval from the banks and Dome’s other creditors in Canada and abroad, including Swiss debenture holders. But after

five years on the brink

of financial collapse, Dome may now

have a real chance of rescue and