CONTANGO OIL & GAS Item 8.01. Other Events.
As previously disclosed, on
Litigation Relating to the Transactions
Following the filing of the preliminary joint proxy statement/prospectus on
Each of Contango and Independence believe the Shareholder Actions are without merit and, along with the individual and other defendants intend to defend against the Shareholder Actions; however, neither Contango nor Independence can predict the amount of time and expense that will be required to resolve the Shareholder Actions nor their outcomes. Additional lawsuits arising out of or related to the Transactions may also be filed in the future.
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Contango and Independence believe that these claims are without merit and no supplemental disclosures are required under applicable laws; however, in order to avoid the risk of the Shareholder Actions delaying the Transactions and to minimize the expense of defending the Shareholder Actions, and without admitting any liability or wrongdoing, Contango and Independence are voluntarily making certain disclosures below that supplement those contained in the Joint Proxy Statement/Prospectus. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, Contango and Independence specifically deny all allegations in the foregoing complaints, including that any additional disclosure was or is required, and believe that the supplemental disclosures contained herein are immaterial.
SUPPLEMENT TO JOINT PROXY STATEMENT/PROSPECTUSContango and Independence are supplementing the Joint Proxy Statement/Prospectus with certain additional information set forth below. These disclosures should be read in connection with the Joint Proxy Statement/Prospectus, which should be read in its entirety. All page references are to pages in the Joint Proxy Statement/Prospectus, and all terms used below, unless otherwise defined, have the meanings set forth in the Joint Proxy Statement/Prospectus. New text is boldface and underlined.
The section of the Joint Proxy Statement/Prospectus titled "PROPOSAL 1: THE TRANSACTION PROPOSAL-Background of the Transactions" is hereby amended and supplemented by:
Inserting the following at the end of the sixth paragraph under the heading "Background of the Transactions" on page 98:
Two of the non-disclosure agreements (including the non-disclosure agreement with KKR) included a customary standstill provision and prohibited Contango's counter-party from requesting or proposing to waive, terminate or amend the standstill provision, but allowed Contango's counter-party to make private proposals to Contango to the extent such proposals would not create a legal disclosure obligation. Both of these non-disclosure agreements also contained a fall-away provision rendering the standstill obligation inoperative and of no force or effect upon certain events related to a change of control transaction involving Contango, including that the standstill provision would fall-away if Contango entered into an agreement with another party similar to the Transaction Agreement.
The section of the Joint Proxy Statement/Prospectus titled "Certain Contango Unaudited Prospective Financial and Operating Information-Non-GAAP Financial Information" is hereby replaced in its entirety with the following:
Non-GAAP Financial Information
The non-GAAP financial measures used in this section were relied upon by
Jefferies at the direction of Contango management, for purposes of its opinion,
and by the Contango Board in connection with its consideration of the
Transactions. Financial measures provided to a financial advisor are excluded
from the definition of non-GAAP financial measures and therefore are not subject
to
The section of the Joint Proxy Statement/Prospectus titled "Certain Independence Unaudited Prospective Financial and Operating Information-Non-GAAP Financial Information" is hereby replaced in its entirety with the following:
Non-GAAP Financial Information
The non-GAAP financial measures used in this section were relied upon by Jefferies at the direction of Independence management, for purposes of its opinion, and by the Contango Board in connection with its consideration of the Transactions.
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Financial measures provided to a financial advisor are excluded from the
definition of non-GAAP financial measures and therefore are not subject to
The section of the Joint Proxy Statement/Prospectus titled "Opinion of Contango's Financial Advisor-Net Asset Value Analysis" is hereby amended and supplemented by:
Replacing the paragraph under the heading "Net Asset Value Analysis-Contango" on page 119 in its entirety with the following:
Net Asset Value Analysis-Contango
Contango's projected asset-level cash flows were discounted to present values
ranging from approximately
The resulting asset valuations were then adjusted for Contango's general and
administrative expenses ranging from approximately
Replacing the paragraph under the heading "Net Asset Value Analysis-Independence" on page 119 in its entirety with the following:
Net Asset Value Analysis-Independence
Independence's projected asset-level cash flows were discounted to present
values ranging from approximately
The resulting asset valuations were then adjusted for Independence's general and
administrative expenses ranging from approximately
Replacing the two paragraphs under the heading "Discounted Cash Flow Analysis-Contango" in its entirety with the following:
Discounted Cash Flow Analysis-Contango
Jefferies calculated the sum of the present values of the unlevered free cash
flows that Contango was expected to generate over the period from
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other things. The present values of the unlevered free cash flows and the terminal value of Contango were then calculated using discount rates from 10.0% to 12.0%. Jefferies chose those discount rates using its professional judgment and expertise, deriving them based on the application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including an analysis of the weighted average cost of capital of Contango.
The present values of the unlevered free cash flows ranged from approximately
Jefferies determined ranges of implied enterprise values for Contango ranging
from approximately
This analysis indicated a range of implied equity values of Contango of
Replacing the two paragraphs under the heading "Discounted Cash Flow Analysis-Independence" in its entirety with the following:
Discounted Cash Flow Analysis-Independence
Jefferies calculated the sum of the present values of the unlevered free cash
flows that Independence was expected to generate over the period from
The present values of the unlevered free cash flows ranged from approximately
Jefferies determined ranges of implied enterprise values for Independence
ranging from approximately
This analysis indicated a range of implied equity values of Independence of
Replacing the second paragraph under the heading "Comparative Public Company Analysis-Contango" on page 121 in its entirety with the following:
Although none of these companies are directly comparable to Contango, Jefferies selected these companies based on its professional judgment because they are exploration and production companies with business characteristics that for purposes of its analysis Jefferies considered similar to the business characteristics of Contango, including such considerations as the relative size or magnitude of their current production, proved reserves and/or cash flows, the mix of their production of oil, natural gas and NGLs, the locations of their assets and other financial and operational characteristics.
-END OF SUPPLEMENT TO JOINT PROXY STATEMENT/PROSPECTUS---------------------------------------------------------------------------------
Additional Information and Where to Find It
This communication may be deemed to be offering or solicitation material in
respect of the Transactions. The Transactions will be submitted to the
shareholders of Contango for their consideration. In connection with the
Transactions, on
The registration statement and the Joint Proxy Statement/Prospectus, any
amendments or supplements thereto and other relevant materials, may be obtained
free of charge at the
No Offer or Solicitation
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Participants in the Solicitation
Contango, Independence and certain of their respective executive officers,
directors, other members of management and employees may, under the rules of
the
Cautionary Statement Regarding Forward-Looking Information
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on Contango's current expectations. The words and phrases "should", "could", "may", "will", "believe", "plan", "intend", "expect", "potential", "possible", "anticipate", "estimate", "forecast", "view", "efforts", "goal" and similar expressions identify forward-looking statements and express our expectations about future events. All statements, other than statements of historical facts, included in this communication that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the Transactions, opportunities and anticipated future performance. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. Consequently, actual future results could differ materially from our expectations due to a number of factors, including, but not limited to: risks related to the Transactions, including the risk that the Transactions will not be completed on the timeline or terms currently contemplated, the risk that Contango's shareholders may not approve the Transactions, the risk that the parties may not be able to satisfy the conditions
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to the Transaction in a timely manner or at all, the risk that the businesses
and assets will not be integrated successfully, the risk that the anticipated
cost savings, synergies, intrinsic value, access to capital and growth from the
Transactions may not be fully realized or may take longer to realize than
expected, and that management attention will be diverted, the risk of potential
liability resulting from any future litigation related to the Transactions, and
other factors which could affect Contango's operations or financial results,
including those described in Contango's Annual Report on Form 10-K and other
reports on file with the
Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Except to the extent required by applicable law, neither Contango nor Independence undertakes any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.
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