The principal shareholders of Interhome Energy Inc., Toronto, are considering a spinoff of Home Oil Co. Ltd., Interhome's oil and gas business, effectively halting the proposed merger of Home and Gulf Canada Resources Ltd.
At the same time, efforts to pursue the sale of Interprovincial Pipe Line Co., Interhome's pipeline business, are proceeding.
Meantime, Gulf Canada and the other major Interhome shareholder, GW Utilities Ltd. (GWU), Toronto, have agreed to terms covering their respective interests in Interhome, paving the way for separation of Interhome's two units.
In an unrelated deal, GWU will receive payment in mid-December of about $915 million for its shares of Consumers Gas Co. Ltd. by tendering to an outstanding offer by British Gas to buy all Consumers shares.
WHAT'S INVOLVED
Olympia & York Developments Ltd. (OYD), a Toronto development company with extensive energy interests, set developments in motion with its plan for a pro rata spinoff of Home Oil to Interhome shareholders.
The spinoff will result in Interhome shareholders owning two separate, publicly traded companies, Interprovincial and Home Oil. OYD said several parties are interested in acquiring control of Interprovincial.
OYD owns about 74.3% of Gulf Canada common stock and 0.5% of Interhome stock. GWU holds 40.7% of Interhome common. GWU in turn is held 89.3% by GWU Holdings Ltd., a private company controlled by the Reichmann family of Toronto. Gulf holds 22.8% of Interhome.
Gulf and Home earlier this year agreed to merge in a $492 million deal (OGJ, Apr. 30, p. 34). Interhome and Gulf recently delayed the merger because of oil price uncertainty. OYD still favors the merger but does not want to delay the spinoff to accommodate the merger.
The spinoff, expected to occur in first quarter 1991, includes a commitment by Olympia & York to pursue sale of Interprovincial.
One provision calls for the controlling interest in Interprovincial not to be sold for 2 years after the spinoff unless there is a concurrent offer to minority shareholders to purchase all other interhome shares on identical terms.
The spinoff also would be subject to a favorable ruling by Revenue Canada as to its tax free nature.
GWU-GULF AGREEMENTS
The GWU-Gulf agreements are meant to leave them about where they would have been June 14 had Gulf acquired only Imperial Oil Ltd.'s interest in Interhome's oil and gas business.
Under the deal, Gulf will sell its interest in Interhome-consisting only of the pipeline business-to GWU or a party designated by GWU after the spinoff of Home. Gulf will receive $271 million, which reflects the agreed allocation between Home and Interprovincial of Gulf's cost to acquire the 22.8% interest in Interhome from Imperial.
That allocation of Gulf's acquisition cost assumes Home will be responsible for its existing third party debt of about $240 million, assume Interhome corporate debt of $225 million, and repay all amounts previously advanced it by Interhome, expected to total about $35 million by yearend.
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