Plains Resources Inc. Board of Directors Receives Letter From Vulcan Energy Corporation
19 Julho 2004 - 1:35PM
PR Newswire (US)
Plains Resources Inc. Board of Directors Receives Letter From
Vulcan Energy Corporation HOUSTON, July 19 /PRNewswire-FirstCall/
-- The following was released today by Plains Resources Inc.
(NYSE:PLX): VULCAN ENERGY CORPORATION 505 FIFTH AVENUE SOUTH
SEATTLE, WASHINGTON 98104 July 18, 2004 Via Facsimile (832)
239-6210 Plains Resources Inc. 700 Milam Street, Suite 3100
Houston, Texas 77002 Attn: Board of Directors Gentlemen: In an
effort to ensure that everyone has the most current and accurate
information, we thought that it was important to reiterate that
$17.25 per share is Vulcan Energy's best and final offer. As you
know, we believe the $17.25 per share price is a full and fair
price for Plains Resources' shares and represents a significant
premium over the value of Plains Resources' shares on a stand-alone
basis, even after consummation of any feasible leveraged
recapitalization. We are confident that the vast majority of your
stockholders will recognize this. In addition, as we have
discussed, Leucadia's suggested leveraged recapitalization is not a
proposal to engage in a transaction with Leucadia and provides no
basis to actually effectuate any such transaction. Furthermore, in
reviewing any correspondence you receive from Leucadia, you should
remember that (i) they pursued their March 19th proposal despite
the fact that they did not understand the tax issues associated
with the structure of the proposal and (ii) they repeatedly refused
to sign a confidentiality agreement, to the end that they have
conducted no due diligence on Plains Resources. We believe that our
position is strongly supported by the following. -- Institutional
Shareholder Services Inc. (ISS) has consistently recommended that
Plains Resources' stockholders should vote for the Vulcan Energy
merger. ISS is widely recognized as the nation's leading
independent proxy advisory firm. Its analyses and recommendations
are relied upon by hundreds of major institutional investment
firms, mutual funds and fiduciaries throughout the United States;
-- Greg Armstrong, the Chief Executive Officer of Plains All
American (PAA), has informed us that he never discussed with
Leucadia their July 7th proposal, and that he has voted his
personal share holdings in Plains Resources in favor of the $17.25
per share Vulcan Energy merger. Mr. Armstrong has also indicated to
us that he views the Vulcan Energy transaction as a positive from
PAA's perspective; -- Over seven months have elapsed since our
original proposal and no bona fide competing proposal has been
made; and -- The $17.25 per share merger consideration represents
an approximate 30% premium over the average closing price of $13.23
per share of Plains Resources common stock over the 30-calendar day
period ending on November 20, 2003, and an approximate 28% premium
over the $13.44 per share closing price of Plains Resources common
stock on the same date, the last full trading day prior to the
public announcement of our original proposal. We believe that
Leucadia's analysis of a leveraged recapitalization is based on
seriously flawed fundamental assumptions and that Leucadia's model
is fraught with inaccuracies, including the following: -- Leucadia
overstates the amount of cash available for Plains Resources to
repurchase its shares by between $47 million and $54 million. *
Plains Resources' net debt (before the suggested recapitalization)
is approximately $15 million higher than assumed by Leucadia. * The
sale of Calumet Florida is likely to realize $10 million to $15
million less than assumed by Leucadia. * The transaction suggested
by Leucadia would require the payment of our $15 million
termination fee (notwithstanding Leucadia's assertion to the
contrary). * Leucadia fails to take into account between $5 million
and $7 million in expenses incurred by Plains Resources in
connection with the Vulcan Energy transaction. * Leucadia's
analysis fails to account for 280G gross-up payments that would
likely be payable under the existing employment agreements for
Messrs. Flores and Raymond in connection with the suggested
recapitalization. -- Leucadia's model relies on several overly
optimistic assumptions regarding PAA, including assuming a 2005
distribution which is $0.28 above the mid point of PAA guidance, as
well as unrealistic assumptions with respect to the pricing, timing
and integration of acquisitions. -- Leucadia also relies on several
inaccurate assumptions regarding Plains Resources, including
underestimating annual G&A by $0.5 million and overstating
Plains Resources' NOLs by approximately $15 million. -- Leucadia's
conclusions rely on the assumption that, post- recapitalization,
Plains Resources' stock would trade at 15 times free cash flow. We
believe this assumption is unreasonable because: -- Prior to the
beginning of this sales process on November 19, 2003, following the
spin-off of PXP, Plains Resources had generally traded at a
multiple of 12.5 times free cash flow, and interest rates have
increased substantially in the intervening period; and -- Kinder
Morgan Inc. currently trades at a multiple of approximately 13
times free cash flow, which is at the top end of the comparable
range, particularly given that Kinder Morgan Energy Partners
generally trades at a lower yield than PAA. -- In addition,
Leucadia's valuation applies its free cash flow multiple to
NOL-shielded after-tax cash flows, effectively valuing the NOL at a
multiple, which is inappropriate because it is a one-time item. We
are committed to completing our $17.25 per share all-cash
transaction with Plains Resources. Respectfully, /s/ David N.
Capobianco David N. Capobianco Vice President cc: R. Joel Swanson,
Baker Botts L.L.P DATASOURCE: Plains Resources Inc. CONTACT: E.
Lynn Hill of Plains Resources Inc., +1-832-239-6185 Web site:
http://www.plainsresources.com/
Copyright