The Chairman of InterOil, Chris Finlayson, says the company is considering an appeal to the Supreme Court of Canada after a court upheld an appeal against the US$2.5 billion (K7.9 billion) sale of InterOil to ExxonMobil. Meanwhile, the man behind the appeal, Phil Mulacek, tells Business Advantage PNG he’s open to dialogue.

InterOil’s Chris Finlayson. Credit: LNG World

Last July, the boards of ExxonMobil and InterOil unanimously approved the US$2.5 billion takeover, which was expected to close in September, subject to shareholder and regulatory review, as reported by Business Advantage PNG.

In its decision, handed down on Friday, November 4, 2016, the Appeal Court of Yukon overturned a ruling by the Yukon Supreme Court in October which had approved the Exxon Proposal.

Unless the Supreme Court of Canada agrees to hear any appeal, analysts say, the ExxonMobil proposal cannot be completed in its current form.

‘This is somewhat of a surprise as we had anticipated the appeal would be dismissed, with InterOil shareholders voting more than 80 per cent in favour of the deal in ­September.’

Exxon has declined to comment on the ruling, but a statement on Interoil’s website says the company ‘continues to believe that the current Arrangement Agreement represents compelling value for all InterOil shareholders’.

InterOil and ExxonMobil are ‘considering the court’s ruling and determining a path to closing the transaction.’

Ruling unexpected

The decision by the Canadian court has caught many analysts by surprise. For example, RBC analyst Ben Wilson told The Australian that the ruling was unexpected.

‘Mulacek said he remains disappointed that the InterOil board and management chose not to cooperate with him in the past.’

‘This is somewhat of a surprise as we had anticipated the appeal would be dismissed, with InterOil shareholders voting more than 80 per cent in favour of the deal in ­September,’ Wilson said.

At worst, Wilson said, ExxonMobil could walk away from the deal, reducing the chance of collaboration.

Mulacek open to sale

Founder and former chairman and CEO Phil Mulacek said in a statement to Business Advantage PNG that the Court of Appeal confirmed numerous deficiencies in disclosures to shareholders.

‘ExxonMobil is an excellent company with a proven LNG track record in Papua New Guinea, and would be a good partner in development of the Elk and Antelope fields.’

He said the court identified a flawed corporate approval process for the proposed ExxonMobil acquisition of InterOil and found the transaction failed to meet fairness requirements for court approval.   

InterOil founder Phil Mulacek. Source: Business Advantage International

Mulacek said he remains disappointed that the InterOil board and management chose not to cooperate with him in the past and that InterOil continues to be dismissive of his concerns regarding the Exxon proposal.

He says, however, that he and other shareholders are open to consideration of a sale to ExxonMobil, but only if it is financially fair and transparent.

‘InterOil has a vast long-term upside. ExxonMobil is an excellent company with a proven LNG track record in Papua New Guinea, and would be a good partner in development of the Elk and Antelope fields and in working with InterOil’s other license assets,’ he tells Business Advantage PNG.

‘Now that the Court of Appeal has spoken, we are open to any productive dialogue with ExxonMobil to create a fair transaction that reflects the long term value of InterOil and provides a solid return for ExxonMobil.’