CALGARY, ALBERTA -- (Marketwired) -- 07/11/13 -- A letter received by Wenzel Downhole Tools Ltd. ("Wenzel" or "the Company") (TSX: WZL) from Perlus Investment Management LLP ("Perlus") on July 8, 2013 (the "Letter"), in connection with the proposed plan of arrangement (the "Arrangement") involving Wenzel, Basin Tools L.P. ("Basin") and 1748017 Alberta Ltd., has been made publicly available.
Before responding to specific statements in the Letter, the Company wishes to thank its shareholders for their strong support for the Arrangement to date, and continues to urge shareholders to vote.
In the Letter, Perlus makes reference to the Valuation and Fairness Opinion Report dated June 17, 2013 (the "Report"), attached to the information circular of the same date with respect to the special meeting of the securityholders of Wenzel. Yesterday, July 10, Wenzel announced that Raymond James Ltd. ("Raymond James"), the independent financial advisor and valuator to the special committee (the "Special Committee"), had determined that it was necessary to correct a technical error in its valuation of the Company. This technical error was not indicated in the Letter; rather, Raymond James independently noted and corrected the matter.
In the same press release yesterday, it was also announced that the members of the Board of Directors of Wenzel voting on the resolution reconfirmed, and unanimously recommended that shareholders and optionholders of Wenzel vote "FOR", the special resolution in respect of the Arrangement.
The Company has made a copy of the revised valuation dated July 10, 2013 prepared by Raymond James available on SEDAR at www.sedar.com.
With respect to the Letter, the Special Committee has reviewed it and sought the advice of its independent financial advisor. On the basis of that advice, the Special Committee provides the following responses:
1. Perlus Claim: The Report uses a multiple of 5.02x in its base case analysis in the Precedent Transaction Approach. A more appropriate multiple would be 5.9x.
The Report, which was based on the professional judgment of Raymond James, a leading financial advisor in the Canadian oilfield services sector, considers relevant transactions for the precedent transaction approach, including consideration for transactions specific to the downhole tools subsection of the oilfield services sector.
The Special Committee understands that if one were to broaden the survey of precedent transactions to include a selection of transactions from the entire Canadian oilfield services sector for the period beginning January 1, 2010, the average trailing twelve month EBITDA multiple implied would be 4.9x, not 5.9x as Perlus has asserted. Further, the average trailing twelve month EBITDA multiple for all cash acquisitions would be 4.6x.
2. Perlus Claim: The Report double counts short term debt of $2,369,136 by including it in the calculation of Total Debt.
This is incorrect. In fact, the Report expressly excludes all short term debt from the calculation of net working capital, and only includes it in the calculation of Total Debt in adjusting the equity value of the Company.
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