Cash-strapped Sterling faces hostile bid (RTGAM)
Time is running out for Sterling Resources.
For months the Calgary-based junior energy player, with assets in the U.K., Romania and France, has been cash-strapped, and now its biggest shareholder has launched a hostile bid to buy the entire company.
Late Tuesday, a subsidiary of the Vitol Group, which ships crude around the world, announced an all-cash bid for the troubled target, valuing the company just shy of $200-million. The bid comes less than a month after Vitol underwrote a $12-million (U.S.) loan to Sterling, which offered some emergency funding.
Sterling’s faced cash shortfalls for months. In November the company announced a marketed equity offering, seeking to raise $45-million, but pulled the deal after just a few days later because management couldn’t lock down the terms they wanted. That ultimately led to the stopgap funding from Vitol in January.
The stock price has suffered during the drought, losing more than three quarters of its value from its 2012 peak of $2.33 per share.
On Wednesday Sterling responded to the hostile bid, noting that the two companies have been in talks, but added that it’s also been talking to other parties. The last part could just be smoke and mirrors to garner a higher bid.
Even if it’s real, time is of the essence. Sterling’s been looking for money for too long, and this bid looks like an easy out for shareholders. Sprott Asset Management, Sterling’s third largest shareholder with about a 10 per cent stake, is already onboard.
Sterling’s hired RBC Dominion Securities to advise management.
(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)