UPDATE 1-Proxy advisor recommends 'no' vote on Pacific Rubiales sale

Wed Jun 24, 2015 4:42pm EDT
 
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(Adds company comment, updates share price)

CALGARY, Alberta, June 24 (Reuters) - Institutional Shareholders Services, an influential proxy advisory firm, is advising its clients to reject a planned C$2 billion ($1.61 billion) sale of Pacific Rubiales Energy Corp, a group representing a fifth of the Canadian oil company's shareholders said on Wednesday.

O'Hara Administration Co, which represents holders with nearly 20 percent of Pacific Rubiales shares who want to block the offer, said ISS raised a number of issues with the bid from Alfa SAB de CV and Harbour Energy Ltd for Pacific Rubiales, the No. 2 oil producer in Colombia.

ISS said the offer did not match what the Canadian-based company said it was worth in March. Among other issues, it is concerned that the board did not put the company up for auction, ascertain the true market value of Pacific Rubiales and that the bid was based on prices of commodities that have since risen.

The C$6.50 per share offer from Alfa and Harbour Energy came during difficult times for Pacific Rubiales, whose shares have plunged 75 percent over the last year as crude prices fell and the company struggled under its hefty debt load.

The opposing shareholders have launched a proxy fight to block the deal for Pacific Rubiales, urging other investors to vote against the offer. However, the producer is seeking to disqualify O'Hara from voting its 21.3 million shares and has said the all-cash offer maximizes value for all of its investors.

"We are confident that no amount of noise will cloud the plain truth that the proposed arrangement undervalues the common shares," O'Hara said in a statement.

Pacific Rubiales said it disagrees with the proxy management firm's conclusion, however, arguing the offer was in the interest of shareholders and that three fairness opinions supported the bid.

"The offer price of C$6.50 is at the high end of the formal valuation range of between C$3.13 and C$7.00 as determined by an independent valuator," Peter Volk, the company's general counsel, said in a statement.

"Since the offer became public on May 5th, no other bidders have materialized and O'Hara has not presented an alternative or plan," he added.

Pacific Rubiales shares ended down 2.2 percent at C$5.42 on the Toronto Stock Exchange. ($1 = 1.2396 Canadian dollars) (Reporting by Scott Haggett; editing by Bernard Orr and G Crosse)