Sputnik Group Limited

October 23, 2006 09:08 ET

Sputnik Group Limited: Shareholder Group to Make Take-Over Bid to Shareholders of Innova Exploration Ltd. 'TSX:IXL'

CALGARY, ALBERTA--(CCNMatthews - Oct. 23, 2006) - Sputnik Group Limited, Pogan Investment Corp., Sulidad Invest & Trade Inc., Hanseatic Investment Holdings Ltd., Drake Associates L.P. and certain of its affiliates and Field Nominees Ltd. and its related entity Harbor Advisors LLC (collectively, the "Shareholders") today announced an offer to acquire up to 6,650,000 common shares of Innova Exploration Ltd. (TSX:IXL) at a price of Cdn$6.75 in cash by way of a formal take-over bid that will be made to all shareholders of Innova (the "Offer"). The Offer is valued at approximately Cdn$44.9 million in total, and represents a premium of 22.8% over the volume weighted average market price of Innova shares for the 20 trading days ended October 20, 2006. The Offer will be made by a bidding company (the "Offeror") formed by the Shareholders for the purposes of making the Offer.

Innova is an Alberta-based oil and natural gas company, the operations of which consist of the exploration for, and the development and production of, natural gas and crude oil in the Western Canadian Sedimentary Basin in south-eastern Saskatchewan, Alberta and north-eastern British Columbia.

The Shareholders, together with certain of their affiliates who may be considered to be acting jointly or in concert with the Offeror, currently own an aggregate of 8,746,250 common shares of Innova, which represents approximately 19.7% of the outstanding common shares of Innova, and upon successful completion of the Offer their shareholdings, together with the Offeror's, will increase to 15,396,250 common shares of Innova, which will represent approximately 34.7% of the outstanding common shares of Innova.

Purpose of the Offer and Plans for Innova

Canadian securities laws mandate that a shareholder may not accumulate 20% or more of the voting or equity shares of a company (except pursuant to certain limited exemptions) without making a public offer open to all shareholders. The purpose of the Offer is to increase the investment made in Innova by the Shareholders, while complying with Canadian securities laws by making a formal offer open to all Innova shareholders.

The Shareholders believe that Innova, through its position in Saskatchewan's Bakken area among other assets, is an attractive long-term investment. As a consequence, they wish to increase their exposure to Innova which they expect to accomplish through the Offer. The Offer also provides an opportunity for Innova shareholders to dispose of some or all of their holdings at a significant premium. After the closing of the Offer, the Shareholders intend to reiterate requests which they have made earlier to Innova to have Mr. Oliver R. Grace, Jr. join the Board of Directors of Innova.

The Shareholders have no current plans for changes in the business, operations, assets, management or personnel of Innova. The Shareholders expect to review Innova and its operations following the completion of the Offer to determine and provide strategic guidance on what changes, if any, would be advisable or appropriate in light of such review and the circumstances which then exist and with the aim of maximizing value for all shareholders. It is the Shareholders' intention to work with the Innova Board of Directors and Innova management in the attainment of these goals.

Certain Terms and Conditions of the Offer

The Offer will be subject to a number of conditions, including but not limited to, the minimum tender to the Offer of at least 4,875,000 common shares, the absence of any material adverse change in the business, operations or financial condition of Innova, the average closing price of West Texas intermediate crude oil for the five business days ending on the expiry date of the Offer being US$53.00 or greater, the waiver or termination of Innova's poison pill and the receipt of any applicable regulatory approvals.

It is expected that the Offer will commence and the formal take-over bid circular will be mailed in early November 2006. The Offer will be open for acceptance for 35 days from the date of mailing of the offering circular.

The Shareholders

The Shareholders consist of Sputnik Group Limited (50 Shirley Street, Nassau, Bahamas), Sulidad Invest & Trade Inc. (Pasea Estate, Road Town, Tortola, British Virgin Islands), Pogan Investment Corp. (Pasea Estate, Road Town, Tortola, British Virgin Islands), Diversified Long Term Group Fund L.P. (55 Brookville Road, Glen Head, New York 11545), Drake Associates L.P. (55 Brookville Road, Glen Head, New York 11545), Sterling Grace Capital Management L.P. (55 Brookville Road, Glen Head, New York 11545), Harbor Advisors LLC (55 Brookville Road, Glen Head, New York 11545), Hanseatic Investment Holdings Ltd. (c/o Rawlinson & Hunter Limited, P.O. Box 3162, Woodbourne Hall, Road Town, Tortola, British Virgin Islands) and Field Nominees Ltd. (c/o Butterfield Trust (Bermuda) Limited, 65 Front Street, Hamilton HM 12 Bermuda).

In addition, Original Value Investors, L.L.C., Grace Development II Corp., Oliver R. Grace, Jr., Asset Value Investors L.P., Frank Sports Corp., First Value Investors L.P., Dedicated Value Investors L.P., and National Value Investors L.P. who will not be shareholders of the Offeror and will not be participating in the Offer, are affiliates of Drake Associates L.P. and may be considered to be acting jointly and in concert with the Shareholders in connection with the Offer for applicable securities law purposes.

Cautionary Statements

This news release contains forward-looking statements, which reflect the Shareholders' current beliefs and expectations. These forward-looking statements are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Undue reliance should not be placed on forward-looking statements.

This news release does not constitute or form any part of any offer or invitation to purchase otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security in any jurisdiction. Such offer will be made only by the formal take-over bid offer and circular. The release, publication or distribution of this news release in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this news release is released, published or distributed should inform themselves about and observe such restrictions. No offer will be made to any person in a jurisdiction where such offer is not permitted by applicable law.

The offer referred to in this new release has not yet commenced. Upon the commencement of the offer, the Offeror will file a take-over bid offer and circular with each of the provincial securities commissions in Canada. The take-over bid offer and circular will contain important information about the offer and should be read by security holders. When the offer is commenced, one will be able to obtain, at no charge, the offer to purchase, take-over bid circular and all other documents when they become available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

Contact Information

  • Thomas Seifert
    (212) 644-5067
    Gregory Shirin
    + 7 (495) 725-5000