Estrella Announces Going Private Transaction

October 21, 2016 9:45 AM EDT | Source: Estrella International Energy Services Ltd.

Buenos Aires, Argentina--(Newsfile Corp. - October 21, 2016) - Estrella International Energy Services Ltd. (TSXV: EEN) (the "Company" or "Estrella"), announces that its board of directors has unanimously approved a going private transaction ("Going Private Transaction") to be completed by consolidating the Company's outstanding common shares ("Common Shares") on the basis of one post-consolidated Common Share for each 1,400,000 pre-consolidated Common Shares (the "Consolidation"). The Consolidation is subject to shareholder approval at Estrella's upcoming annual and special meeting of shareholders scheduled to be held on November 30, 2016 (the "Meeting"), and to regulatory approval.

As fractional shares will not be issued in the Consolidation, each holder of Common Shares of Estrella, other than its controlling shareholder Ringo Holding L.P., are to receive $0.19 (the "Consolidation Price") in cash for each Common Share held immediately prior to the Consolidation becoming effective. The Consolidation Price represents a premium of 40% to the closing price of the Common Shares on October 20, 2016.

There are currently 2,994,765 Common Shares issued and outstanding, however, Ringo Holding L.P. has given notice that it will convert 10,933,333 Series B Preference Shares of Estrella into 10,933,333 Common Shares of Estrella prior to the record date for the Meeting, such that following such conversion, there will be 13,928,098 Common Shares issued and outstanding, with Ringo Holding L.P. holding 90.46% of the issued Common Shares.

After completion of the Consolidation, Ringo Holding L.P. will be the sole voting shareholder of Estrella, holding 9 Common Shares.

Pursuant to Multilateral Instrument 61-101 ("MI 61-101") and Policy 5.9 of the TSX Venture Exchange ("TSXV"), the Going Private Transaction by way of the Consolidation constitutes a "business combination". Ringo Holding L.P. is a "related party" because it owns or controls, directly or indirectly, more than 10% of the voting rights attached to all of the Company's outstanding Common Shares. Accordingly, absent an exemption, the Company is required to obtain "minority approval" of the Consolidation ("Minority Approval").

Pursuant to MI 61-101, however, there is an exemption from the Minority Approval requirement where one or more persons that are "interested parties" beneficially own, in the aggregate, 90% or more of the outstanding securities of a class of affected securities at the time that the business combination is agreed to, and an appraisal remedy is available to holders of the class of affected securities under the statute under which the issuer is organized or is governed as to corporate law matters.

As at the Record Date, Ringo Holding L.P. will hold 90.46% of the issued and outstanding Common Shares, and as such, the Consolidation will not be subject to the Minority Approval requirement.

The board of directors of Estrella established an independent committee comprised of the sole independent director, Phil MacDonnell, to review the proposed Going Private Transaction and the Consolidation. The committee engaged Blaney McMurtry LLP as its independent legal counsel and Evans & Evans, Inc., an independent professional valuator, to provide a comprehensive valuation report and opinion as to the fairness of the Consolidation to the shareholders of the Company other than Ringo Holding L.P. (the "Valuation Report and Fairness Opinion"). On the basis of its review, including the Valuation Report and Fairness Opinion, the independent committee unanimously recommended to the Company's board of directors that the board of directors approve the Consolidation and recommend that the shareholders vote in favour of the Consolidation. The Valuation Report and Fairness Opinion will be included in Estrella's management information circular for the Meeting which, following regulatory review, will be available under Estrella's profile at www.sedar.com.

Subject to the approval of the Consolidation at the Meeting and to regulatory approval, Estrella intends to file articles of amendment to effect the Consolidation. Once the Consolidation is completed, Estrella intends to apply to have its Common Shares delisted from the TSXV and intends to apply to cease to be a reporting issuer with the applicable securities regulatory authorities.

In proposing the Going Private Transaction, management of the Company considered a variety of factors. Under applicable securities laws a broad range of regulatory obligations are imposed on companies, such as the Company, with public shareholders. These regulatory requirements necessitate the employment of independent auditors, financial consultants, printers, lawyers and other skilled personnel. In addition, the Company is required to pay filing and listing fees to securities regulators and the TSXV. These compliance costs are a severe drain on the Company's already limited cash flows.

In addition, since the third quarter of 2014, oil prices have decreased significantly due to strong supply coming from OPEC and North America. Oil prices have been fluctuating between US$26/Barrel and US$51/Barrel in the first three quarters of 2016. Although the reduction in oil price affects each market that the Company operates independently, the lower prices have negatively impacted the Company's operations, cash flows, and the oil service industry as a whole.

Management and the board of directors believe that the significant time and costs associated with meeting the legal and regulatory obligations to public shareholders cannot be justified in view of the Company's current financial situation. As such Estrella believes that the Consolidation is in the best interests of the Company and wishes to complete the Going Private Transaction in order to provide its shareholders, other than Ringo Holding L.P. with the opportunity to realize the value for their shares.

For further information contact:

Estrella International Energy Services Ltd.

Diego Acevedo
Telephone:
Facsimile:
Email:

Chairman of the Board of Directors
+54 (11) 5217-5250
+54 (11) 5217-5280
info@estrellasp.com

Statements in this press release may contain forward-looking information. Any statements in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions. Forward-looking statements in this press release include, but are not limited to, statements with respect to the future business plans, prospects and services.

The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances, may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Estrella. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The forward-looking statements contained in this press release are made as of the date of this press release, and Estrella does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities law.

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Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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