Enmax Corp. bows out of takeover battle for Cordero Energy Inc.

By Lauren Krugel, The Canadian Press

CALGARY - Enmax Corp. is bowing out of a takeover battle for junior natural gas producer Cordero Energy Inc. (TSX: COR.TO) after its latest bid failed to get enough shareholder support, a spokesman for the City of Calgary's energy distributor said Friday.

Earlier this week Cordero's board of directors recommended shareholders accept the $5.20-per-share cash offer over one from rival Ember Resources Inc. (TSX: EBR.TO) worth $5.50 per share or 2.683 ember shares.

The Ember deal, which includes $70 million in cash payable to Cordero shareholders, was set to expire at 5 p.m. MT Friday.

"We felt that we were offering a fair price in the light of current market conditions," said Enmax spokesman Peter Hunt.

"We're not going to get sucked into paying too high a price and we weren't prepared to go beyond where we are now."

Enmax first made a play for Cordero in February because it wanted to secure a steady supply of natural gas to meet its power generation needs.

"We've said at the start of this that we saw this as being the first in a series of gas acquisitions to meet the needs of our power generation," Hunt said.

"So we were already looking at other prospects while we were still doing the Cordero negotiations. We're well down the track of one other possibility and there are a number of others in the pipeline."

Hunt declined to elaborate on what future acquisitions Enmax plans to pursue.

Ember CEO Douglas Dafoe said late Friday afternoon he had not yet received official word from Cordero or Enmax, but was pleased to hear news of Enmax's move.

"That's step one for us. And that doesn't surprise us either," he said.

Ember, which made its first unsolicited offer in May, had argued that it would mesh well with Cordero, since both companies have coalbed methane operations in the Horseshoe Canyon area of Alberta. Combined the two companies would have about 450 drilling locations, which they could develop more effectively as a merged company, Ember has said.

On the other hand, Enmax has said Ember is saddled with debt and infrastructure financing obligations that make its bid less attractive.

Since Ember's market capitalization is less than half of Cordero's, it would effectively be a reverse takeover that does not guarantee improved liquidity for Cordero shareholders, Enmax has said.

Cordero shares were up slightly to $5.19 a share on the Toronto Stock Exchange Friday. Ember's were down more than three per cent to $1.97.

Also Friday, Enmax said its subsidiary, Enmax Green Power Inc., acquired Kettles Hill Wind Energy Inc., the operator of a wind power facility near Pincher Creek, Alta., for $163 million.