CALGARY, ALBERTA -- (Marketwire) -- 03/04/13 -- JEC Capital Partners, LLC issues the following open letter to shareholders of Ithaca Energy Inc.:
March 4, 2013
Dear Ithaca Energy Inc. shareholders,
We, JEC Capital Partners ("JEC") write to you as a concerned shareholder of Ithaca Energy Inc. ("Ithaca" or the "Company").
On March 1, 2013 Ithaca and Valiant Petroleum plc ("Valiant"), a company listed on AIM, issued a joint press release (the "Press Release") announcing a transaction that is egregiously structured to circumvent the requirement for disinterested shareholder approval, highly dilutive to Ithaca shareholders, supported by conflicted shareholders, and timed to entrench management and the board of directors of Ithaca (the "Ithaca Board") without receiving shareholder approval (the "Opposed Transaction"). A copy of the Press Release announcing the Opposed Transaction is publicly disclosed on the Company's profile on SEDAR at www.sedar.com ("SEDAR").
For the reasons outlined below, we are petitioning the Ithaca Board to consider the views of all of its shareholders by seeking disinterested shareholder approval for the Opposed Transaction. The summary reasons are as follows:
- Dilution of Ithaca Shareholders. The Opposed Transaction is extremely dilutive to Ithaca's shareholders, contemplating a share issuance equal to approximately 22% of Ithaca's currently outstanding share capital (just shy of the 25% threshold required for a shareholder vote by the Toronto Stock Exchange) with the remainder of the purchase price backstopped by an expensive US$350 million bridge loan. This acquisition structure is clearly a deliberate attempt by Ithaca to avoid a shareholder vote on the Opposed Transaction through the use of expensive debt to satisfy the balance of the purchase price. Furthermore, Ithaca's stock is currently tremendously undervalued and we therefore question the judgement and motivation of the Ithaca Board to issue stock at this valuation.
- Cross-Ownership Benefits Conflicted Ithaca Shareholders. Management of Ithaca have entered into understandings or agreements with shareholders of Ithaca who are also significant shareholders of Valiant. These conflicted shareholders will be given the opportunity to vote on the Opposed Transaction only by virtue of their ownership of Valiant shares. You, like JEC, as a disinterested shareholder of Ithaca will not be given the opportunity to vote on a significant transaction affecting your investment whereas conflicted shareholders of Ithaca will be permitted to do so. Moreover, these conflicted shareholders (whose significant interest in Valiant will, on closing of the Opposed Transaction, result in a 37% gain in the value of their Valiant shareholdings relative to the trading price prior to the announcement of the Opposed Transaction) will have their shareholdings in Ithaca (on a post-transaction basis) concentrated as a result of the Opposed Transaction by the acquisition of additional Ithaca shares. The Opposed Transaction will therefore materially affect the control of Ithaca.
- Avoiding Ithaca Shareholders. The Opposed Transaction has been announced in the midst of a proxy battle highlighting Ithaca's attempts at entrenchment. Following the close of markets on March 1, 2012, Ithaca filed on SEDAR a notice of meeting and record date for a special meeting to be held on April 8, 2013 (the last possible date requested in the Requisition (as defined below)). By contrast, the meeting of Valiant shareholders to determine the Opposed Transaction (which contemplates the addition of two Valiant directors to the Ithaca Board) will take place on April 2, 2013. Ithaca is engaging in entrenchment tactics by filling the Ithaca Board with two additional directors, and is forcing the Opposed Transaction on Ithaca shareholders prior to the requisitioned meeting in order to avoid accountability.
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