News Column

Lawndale Capital Management and Montclair Energy still question Equal Energy's $230 million deal

June 12, 2014

By Jay F. Marks, The Oklahoman, Oklahoma City

June 12--Shareholders will determine the future of Equal Energy Ltd. next month at a special meeting in Calgary.

They are being asked to consider a $230 million offer from Tulsa-based Petroflow Energy Corp. to acquire all of the company's outstanding stock.

Two-thirds of them must sign off on the deal for it to be completed, but one of Equal's largest shareholders said Wednesday it still is not sold on the Petroflow proposal.

Lawndale Capital Management LLC has been critical of the proposed deal since it was announced in December, arguing it might not provide adequate compensation for Equal's shareholders. The California-based investment adviser has suggested it would support another alternative that would return more money to shareholders than Petroflow's offer of $5.43 a share.

Lawndale said it is reviewing the 120-page proxy statement Equal filed Wednesday, but it has decided to vote against the "golden parachute" compensation that could be paid to the company's executive if the deal is completed. The compensation vote is not binding.

Five Equal executives stand to receive more than $500,000 each if shareholders approve the deal, led by CEO Don Klapko at $2.8 million. Klapko also would earn an additional $3.5 million from sale of his Equal stock, according to the proxy statement, which indicates he controls about 650,000 shares.

Lawndale holds close to 5 percent of Equal's 36 million outstanding shares, making it one of the Oklahoma City-based company's largest shareholders.

Another large shareholder, Montclair Energy, has been vocal in questioning the Petroflow deal.

Montclair had sought to acquire Equal last year for $4 a share before being outbid by Petroflow, according to Equal's proxy statement.

In April, Montclair proposed a stock buyback to boost Equal's value rather than selling the company. The Alabama-based company has not indicated how it will vote on the Petroflow deal.

Equal's board voted unanimously in December to endorse the deal, according to the proxy.


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Source: Daily Oklahoman (Oklahoma City)

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