Pacific Exploration & Production Shareholders Move to Block Buyout Bid -- Update

By Sara Schaefer Muñoz and Ben Dummett

BOGOTÁ -- Shareholders of troubled Canadian-Colombian oil firm Pacific Exploration & Production Corp. have asked Colombia's markets regulator to block a possible buyout deal they say favors management over investors, heating up the battle over the struggling company's assets.

Led by O'Hara Administration Co., which owns a 20% stake in Pacific, the shareholder group filed a formal complaint with the regulator, alleging that an offer by private-equity fund Catalyst Capital Group in Toronto benefits Pacific's co-chairmen but could leave shareholders with nothing, according to two people familiar with the talks.

Pacific, saddled with debt and facing a cash crunch amid the fall in oil prices, has seen its market capitalization fall from a peak of $8 billion in 2012 to around $500 million today. Since January, it has twice had to waive bond payments and has seen its share price collapse 40%, to 0.91 Canadian cents (70 U.S. cents) on the Toronto Stock Exchange on Friday.

In addition to Catalyst, Pacific has received offers from Mexican conglomerate Alfa SAB and U.S. energy investment firm EIG.

An advisory committee appointed by Pacific's management to review the offers will present its recommendations Sunday and is expected to back the Catalyst bid, the people familiar with the talks said. If the board votes to accept, the deal must then be approved by holders of two-thirds of the company's debt.

The protesting shareholder group, which combined owns 35% of the company, claims the advisory committee is stacked with people acting in the interests of Pacific's co-chairmen Serafino Iacono and Miguel de la Campa. Shareholders point to conflicts of interest between the committee and management, such as Messrs Iacono's and de la Campa's directorships at several Colombian companies alongside two out of the three committee members, say two people familiar with the discussions.

Spokesmen for Pacific Energy, Alfa and EIG declined to comment. A spokesman for Catalyst didn't immediately respond to a request.

Most of Pacific's assets are in Colombia. Its precarious financial position represents a stark change of fortune for a firm that came to symbolize Colombia's economic transformation of the past decade. It was founded by three Venezuelan and Italian oil and mining executives in 2003, who managed to extract heavy oil from Colombia's eastern Rubiales field, earning hundreds of millions of dollars a year. By the early 2010s, Pacific had become Colombia's second-largest company by revenue. But the company later accumulated massive debt and was hit by the sharp drop in oil prices, which spent all of last year trading below $65 a barrel on the New York Mercantile Exchange.

Anatoly Kurmanaev contributed to this article.

Write to Sara Schaefer Muñoz at sara.munoz@wsj.com

(END) Dow Jones Newswires

April 08, 2016 21:16 ET (01:16 GMT)

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