Lycos Energy closes merger with Mahikan Oil

Executive Summary

• Lycos Energy Inc. has closed its strategic business combination with Mahikan Oil Corp., acquiring all outstanding common shares of Mahikan in an all-share transaction valued at approximately $49.7 million.
• Concurrent with the merger, Lycos completed a non-brokered private placement equity financing, raising gross proceeds of approximately $30.0 million to repay transaction-related indebtedness and fund development capital.
• The transaction expands Lycos's Mannville-focused asset base and results in significant board and management changes, including the appointment of new directors and officers from Mahikan and the resignation of several incumbent directors and officers.

Key Details

• Transaction Structure: All-share acquisition of Mahikan Oil Corp. by Lycos Energy Inc.
• Consideration: Former Mahikan shareholders received an aggregate of 29,781,301 Lycos common shares, issued at a deemed price of $1.20 per share. Total consideration was approximately $49.7 million, including the assumption of Mahikan's net debt.
• Hold Periods (Mahikan Shares):
  • Directors, officers, and 10% shareholders: 21,150,001 shares subject to hold periods releasing one-third at 4, 8, and 12 months post-closing.
  • Other shareholders: Subject to a four-month hold period.
• Equity Financing Details:
  • Gross proceeds: Approximately $30.0 million.
  • Shares issued: 25 million Lycos shares.
  • Price per share: $1.20.
  • Use of proceeds: Repayment of indebtedness incurred in connection with the transaction, financing development capital for acquired assets, and general corporate purposes.
  • Hold period: Statutory hold of four months and one day for all securities.
• Insider Participation: Directors and officers subscribed for an aggregate of 3,353,675 Lycos shares in the financing. This is a related party transaction under MI 61-101; formal valuation and minority shareholder approval requirements were exempted as insider participation did not exceed 25% of market capitalization.
• Board Appointments:
  • Tom Coolen (Chairperson) and Steve Buytels appointed as directors.
  • Bruce Hall and Brendan Paton appointed as directors.
  • Resignations: Kevin Olson, Geri Greenall, and Ali Horvath resigned as directors.
• Officer Appointments:
  • Taylor Law appointed as Vice-President, Exploration.
  • Mike Bucholtz appointed as Vice-President, Engineering and Business Development.
  • Resignations: Jamie Conboy (VP, Exploration) and Jeff Rideout (VP, Land) resigned.
• Option Cancellations:
  • 2,362,300 Lycos share stock options voluntarily surrendered for no consideration.
  • 728,125 options held by exiting directors/management expected to terminate in 30 days.
• Early Warning Disclosure: 24 Capital Corp. (controlled by Mr. Coolen) now holds approximately 15.44% of issued and outstanding Lycos shares (16,678,001 shares) and 22,321 warrants, up from 2.82% prior to the transaction.
• Advisers:
  • Financial Advisers to Lycos: National Bank Capital Markets (Lead), Peters & Co. Ltd. (Co-financial).
  • Strategic Advisers: Velocity Wedbush Partners, ATB Cormark Capital Markets, BMO Capital Markets, Haywood Securities Inc., and Canaccord Genuity Corp.
  • Financial Adviser to Mahikan: Peters & Co. Ltd.
  • Legal Counsel: Stikeman Elliott LLP (Lycos), Torys LLP (Mahikan).
  • Adviser Compensation: Aggregate cash compensation of $2.3 million.
• Regulatory Status: Conditionally accepted by the TSX Venture Exchange, subject to final acceptance.

Notable Quotes

• "The transaction with Mahikan significantly expands Lycos's Mannville focused asset base and development inventory. We believe the transaction positions the company for continued production growth and long-term value creation. Looking ahead, Lycos intends to remain active in pursuing additional accretive opportunities, while maintaining a disciplined approach to capital allocation." — Dave Burton, President and CEO of Lycos