Gallic/Petromanas -- summary under Triangular Amalgamations

Summary Under
Tax Topics - Public Transactions - Mergers & Acquisitions - Amalgamations - Triangular Amalgamations
Triangular amalgamation of Gallic with subsidiary of Petromanas, with option of Gallic shareholders to effect a pre-amalgamation transfer of their shares under s. 85(1) or 85.1
General

Proposal for all the shareholders of Gallic to become shareholders of Petromas and for Gallic to be amalgamated with AcquisitionCo. The Petromanas shares to be received are estimated to represent a value of $0.07 per Gallic share, representing an 11% premium based on the 10-day pre-announcement VWAP of Petromas shares on the TSXV.

Plan of Arrangement

Under an Alberta Plan of Arrangement:

  • Gallic shares of dissenters are deemed to have been transferred to Petromanas, with a right to be paid their fair value by Petromanas
  • Gallic shares held by those shareholders who have so elected by 2:00 pm Calagary time two days before the proposed November 30 effective date ("Exchanging Gallic Shareholders") are transferred to Petromanas on the basis of 0.3736 of a Petromanas share for each Gallic share (the "Exchange Ratio")
  • AcquisitionCo and TORC amalgamate to continue under the Petromanas AcquisitionCo name ("AmalCo"). On the amalgamation:
    • each issued and outstanding Gallic share (other than Gallic shares held by Petromanas) is exchanged for 03736 of a Petromanas share
    • Petromanas's shares of AcquisitionCo and of Petromanas become shares of AmalCo on a 1-for-1 basis
    • warrants entitling the holders to acquire Gallic shares ("Gallic Warrants") are exchanged for warrants to acquire Petromanas shares equal in number to that number of Gallic shares otherwise issuable on the exercise of the Gallic Warrants multiplied by 0.3736, with the exercise price adjusted accordingly
S. 85 elections

Exchanging Gallic Shareholders who wish to make an s. 85(1) or (2) election must provide a completed election package within 90 days of the effective date of the arrangement, subject to Petromanas extending this deadline.

Canadian tax consequences

The transfer of Gallic shares held as capital property by Exchanging Gallic Shareholders will occur on a rollover basis under s. 85.1 unless they include any portion of the capital gain or loss otherwise to be recognized in the computation of their income for the year, or they make a valid election under s. 85(1) or (2). There will be a rollover under s. 87(9)(a) and 87(4) for Petromanas shares received on the triangular amalgamation if the Gallic shares were capital property. The exchange of Gallic Warrants will occur on a rollover basis under ss. 87(4.3) and 87(9)(a.2).

Dissenters will realize a capital gain or loss based on the cash amount received (excluding interest).

Standard non-resident disclosure.