Alfa SAB, Harbour Energy drop plans for Pacific Rubiales acquisition

Mexico's Alfa SAB and partner Harbour Energy Ltd dropped their plans for the acquisition of Pacific Rubiales Energy Corp after the driller's largest shareholder turned down a takeover offer once valued at as much as $1.7 billion.

Pacific Rubiales yesterday said it would have ''no further material obligations'' to its former suitors after accepting their withdrawal. According to Alfa its offer ''correctly valued'' Bogota-based Pacific Rubiales and did not have any plans for sweetening the price.

The pullout put paid to Alfa's efforts to emerge as an oil company and take advantage of Mexico opening its fields to private producers for the first time since 1938.

The maker of lunch meat and car parts fell 10 per cent since being identified as a bidder in May, a sign of investor dismay even as Pacific Rubiales stakeholder O'Hara Administration Co slammed the C$6.50-a-share bid as too low.

''We see this as positive for Alfa,'' Ana Sepulveda, an analyst at Invex Casa de Bolsa SA, said in a telephone interview in Mexico City, Bloomberg reported.  ''The requirements from funds that held stakes in Pacific Rubiales were overvaluing the company.''

Alfa and Harbour, in a statement acknowledged their cash offer for the South American-focused and Toronto-listed company had run into significant opposition.

''The early proxy returns suggested that a significant number of shares would be voted against our proposal,'' Harbour chief executive Linda Cook said adding that the offer had been full and final.

The opposition was led by O'Hara Administration Co, whose mostly South American allies controlled 19.8 per cent of the stock and had complained that the offer undervalued Pacific Rubiales.

The group had not offered an alternative takeover proposal for the company, which was saddled with around $5-billion of debt at a time of falling crude oil prices. The driller's managers had warned shareholders that rejection of the offer would hurt expansion prospects due to  constraints from the debt burden.

''We're pleased that the arrangement agreement was terminated,'' said O'Hara's Orlando Alvarado, the Globe and Mail reported. ''As one of the company's largest shareholders, we look forward to engaging with various stakeholders and playing a constructive role in the company's future.''

Pacific Rubiales said it would now move ahead with various cost cutting measures, sell assets, reduce debt and move forward with a joint venture in Mexico it had previously set up with Alfa.