Tropic Goes to the Well

Tropic Networks Inc. is looking to merge its way into the oil business, Light Reading has learned.

That's right, Texas Tea. According to a rather large, 497-page PDF prospectus filed with the Canadian System for Electronic Document Analysis and Retrieval (SEDAR), Tropic on Dec. 22 will present shareholders with a proposal to merge with Canadian energy companies Chamaelo Exploration Ltd. and Tournament Energy Ltd. The document includes letters to Tropic, Chamaelo, and Tournament shareholders.

Tropic is looking to acquire all outstanding shares of Chamaelo and Tournament, essentially functioning as the acquirer, according to the shareholder letters. The letter says that the deal will consist of a share exchange and a cash component. The cash portion of the deal would require $87.75 million Canadian (US$76.22 million) in additional funding, which Tropic has apparently raised in a private placement, according to a Dec. 7 Chamaelo press release.

"Tropic, which will carry on the business as 'Chamaelo Exploration,' will, through its subsidiaries, own all of Chamaelo's oil and natural gas assets and undeveloped lands and a majority of Tournament's oil and natural gas assets and undeveloped lands," says a letter written to Tropic shareholders as printed in the PDF.

The resulting merged company would focus on the oil and gas industry, with expected production exceeding 5,000 BOE [barrel of oil equivalent] per day and an undeveloped land base of approximately 116,800 net acres. "Over 60 potential drilling locations have been identified on the lands to be held by the combined entity," says the shareholder letter.

The merger would create a new subsidiary of Tropic, referred to in the documents as "Tropic NewCo." It's not clear what the former Tropic Networks would do with its optical networking assets.

Tropic had not returned calls for comment at press time. As of today, its Website continues to describe it as an optical networking company.

Chamaelo, based in Alberta, Canada, announced merger plans on Oct. 25 in a press release that mentioned Tournament and "a private technology company" referred to only as "TechCo." The new entity would operate as "Chamaelo Exploration" and would be run by Chamaelo's current management team, the Chamaelo press release said.

Tournament is another Alberta-based energy company with Alberta oil and gas assets worth roughly $190 million, according to Chamaelo.

The merger will be presented to Chamaelo and Tournament shareholders after the Tropic shareholders have had their chance to approve it.

The news comes a month after Tropic named former JP Morgan Partners banker David Orr, as its new chairman, ostensibly to have Tropic look at all its options. (See Tropic Names Chairman .) "Effective immediately, Mr. Orr will work with the Tropic Networks Board of Directors and senior management team as they expand their customer base and drive value through both current and new strategic alliances," said a November press release issued by Tropic.

"Mr. Orr brings direct experience in scaling growth companies, specifically in the area of optical networking, making him an ideal candidate for this role," said the release.

As recently as May 2005, Tropic was out raising substantial amounts of money, touting its prospects in the ROADM Market. (See Tropic Taps Investors Again.) Jed Clampett had no comment on the matter.

— R. Scott Raynovich, US Editor, Light Reading

Stevery 12/5/2012 | 2:51:00 AM
re: Tropic Goes to the Well It's not clear what the former Tropic Networks would do with its optical networking assets.

Yes it is.
Peter Heywood 12/5/2012 | 2:50:58 AM
re: Tropic Goes to the Well Pray tell us, then!
cyber_techy 12/5/2012 | 2:50:58 AM
re: Tropic Goes to the Well The equipment will be donated "as is" and at MSRP to Carleton University to earn Tropic Newco Oil and Gas Exploration with more tax deductions. With current gas prices, these companies can use all the tax deductions they can find.

Maverick1 12/5/2012 | 2:50:57 AM
re: Tropic Goes to the Well simply a canadian method for a company to trade/sell losses to a company who will use as write off and then the original company bought back/sold without the loss yoke. I don't think tropic is getting out of optical. And I didn't listen to my dear old dad when he told me to get into accounting
PO 12/5/2012 | 2:50:57 AM
re: Tropic Goes to the Well According to SEDAR filings, Chamaelo (Energy, Exploration, some such entity) went through a similar dance earlier this year with Orbus Life Sciences, but apparently did not proceed with the plan, or at least not all of it. Anyone have any details as to why not, or what is materially different in the proposal with Tropic?

Orbus second quarter 2005 report:

SEDAR filing on June 24 2005 of Management Information Circular on behalf of Chamaelo Exploration:
PO 12/5/2012 | 2:50:57 AM
re: Tropic Goes to the Well "Pray tell us, then!"

I believe the answers you seek are mostly found in Appendix H, starting around page 246 of the SEDAR filing. In particular, H-4 and H-21,22. Further details are, of course, distributed nonuniformly throughout the document.
Stevery 12/5/2012 | 2:50:56 AM
re: Tropic Goes to the Well I don't think tropic is getting out of optical

What self-respecting provider is going to bother purchasing from a company whose management engages in distractions like this?

They're toast.
Maverick1 12/5/2012 | 2:50:52 AM
re: Tropic Goes to the Well what company doesn't/hasn't taken advantage of all accounting opportunities in this business?
Pete Baldwin 12/5/2012 | 2:50:48 AM
re: Tropic Goes to the Well PO -- good catch. We've done a follow-up story:

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