3. Perlus Claim: The working capital surplus used to adjust the equity value of the Company should be $32,756,731.
This is incorrect as this adjustment assumes that Wenzel does not require working capital to operate. All oilfield services companies, including Wenzel, require significant working capital to allow them to operate and generate earnings. Working capital surplus in oilfield services companies is working capital beyond what is required to operate the business as a going concern. Accordingly, the Report makes an adjustment for the working capital that existed at the effective date of the valuation by Raymond James which was in excess of the working capital historically required by the Company.
4. Perlus Claim: The Report attributes no value to the working capital position of the Company and the Company has historically had a large working capital surplus.
The Report explicitly gives full value to the Company's working capital position, and considers it in relation to the working capital historically required by the Company to determine if there is a surplus or deficiency. It is important to note that net working capital held in oilfield services companies is capital that is required to operate the business and it cannot be treated as if it can be liquidated and removed from the business when valuing the Company as a going concern.
5. Perlus Claim: The figure of 134 days of revenue used for working capital requirements is based on a time when the Company was experiencing 40% sales growth two years in a row.
In the Report, working capital is calculated utilizing the days of revenue historically required by looking at annual working capital requirements for the period between January 1, 2009 and March 31, 2013. While the period did include two consecutive years of sales growth, it also included two years of sales contraction. As a point of reference, days of revenue required were as high as 159 days for the twelve month period ending March 31, 2010.
6. Perlus Claim: Roughly 90% of Wenzel's total inventory consists of its rental fleet.
This is incorrect. The rental fleet is accounted for as part of Property, Plant & Equipment under the Company's Non-current Assets. Furthermore, Wenzel's inventories of $16,073,773 at December 31, 2012 are stated in accordance with IFRS. We refer to the Company's audited financial statements for the year ending December 31, 2012, and the notes thereto, which are available on SEDAR at www.sedar.com or on the Company's website at www.downhole.com.
7. Perlus Claim: The complete abandonment and neglect of monetary value associated with both receivables and inventory is unfair at best.
This is incorrect. In the Report, full value has been given to the Company's inventory and receivables, as well as the income taxes recoverable of $5.1 million, in calculating the working capital surplus in relation to required working capital.
8. Perlus Claim: Non-solicitation clause impacts ability to attract other offers.
The non-solicitation covenants, matching rights and break fee contained in the arrangement agreement dated May 13, 2013 are customary for transactions of this nature and were taken into consideration by the Special Committee in concluding that the Arrangement is in the best interests of the Company.
Those shareholders seeking further information should feel free, and are encouraged, to contact the Company's proxy and information agent, CST Phoenix Advisor; contact information is provided below.
Since the Company intends to postpone the special meeting to allow for distribution of the technical correction to the valuation range to its securityholders, as announced in yesterday's press release, we are confident there will be sufficient time for shareholders to review that correction, this press release, and obtain answers to any further questions they may have.
More details will follow in a press release expected next week.
Finally, Basin, which holds approximately 37% of the outstanding shares of the Company (on the basis of the conversion of each series 1 preferred share for one common share), has specifically advised the Special Committee that the consideration of $2.25 per common share offered under the Arrangement will not be increased.
This price per share was arrived at after negotiation with the Special Committee and remains within Raymond James' valuation range, as revised on July 10, 2013. The cash consideration represents a 30.8% premium to the last three months' volume weighted average trading price of Wenzel's common shares on the Toronto Stock Exchange prior to the announcement of the transaction on May 14, 2013.
Securityholders with questions or requiring more information are encouraged to contact the Company's proxy and information agent, CST Phoenix Advisors, by: (1) toll-free telephone in North America at 1-800-761-6534 or collect call at 1-201-806-2222, or (2) by e-mail at email@example.com.
About Wenzel Downhole Tools Ltd.
The Company is a designer, manufacturer, seller and renter of drilling tools used in oil and gas exploration, that operates in Canada, the United States and internationally; its common shares trade on the Toronto Stock Exchange under the symbol "WZL".
The Company's Canadian sales, manufacturing and servicing facilities are located in Edmonton, Alberta and its US sales and servicing facilities are located in Conroe, Texas; Odessa, Texas; Morgantown, West Virginia; Casper, Wyoming and Oklahoma City, Oklahoma. It also has a sales and service facility in Celle, Germany. The main corporate office is located in Calgary, Alberta.
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY AND ACCURACY OF THIS NEWS RELEASE
CST Phoenix Advisors
Toll-free telephone in North America: 1-800-761-6534
Collect call: 1-201-806-2222
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