STEP Energy Begins Distribution of Circular for Shareholder Meeting to Approve Arrangement with ARC Energy Fund 8
STEP Energy Services Ltd. (“STEP” or the “Company”) has officially begun sending out its management information circular (the “Circular”) and related documents to shareholders ahead of a special meeting (the “Meeting”) to consider and approve a previously announced plan of arrangement (the “Arrangement”). This arrangement is structured under Section 193 of the Business Corporations Act (Alberta) and involves STEP, the limited partnerships comprising ARC Energy Fund 8 (“ARC Energy Fund 8”), which is advised by ARC Financial Corp. (“ARC”), and 2659160 Alberta Ltd. (the “Purchaser”). Together, the Purchaser and ARC Energy Fund 8 are referred to as the “Purchaser Parties.”
The Circular provides full details about the proposed transaction, outlining the terms of the Arrangement, the expected benefits to shareholders, and the procedures for voting. STEP’s board of directors encourages shareholders to carefully review the materials and participate in the decision-making process.
Transaction Overview
Under the terms of the Arrangement, each common share of STEP (“Share”) held by eligible shareholders (“Shareholders”)—other than those held, controlled, or directed, directly or indirectly, by ARC-related entities—will be purchased for $5.50 in cash per share (the “Consideration”). The transaction excludes Shares held by ARC Energy Fund 6, ARC Energy Fund 8, the Purchaser, and any other entities controlled or managed by ARC (collectively, the “ARC Funds”).
The $5.50 per share cash consideration represents a significant premium across various valuation periods prior to the announcement of the proposal. Specifically, the Consideration represents approximately:
- 29.11% premium over the closing price of $4.26 per share on the Toronto Stock Exchange (TSX) as of September 24, 2025, the last trading day before the non-binding offer from ARC was announced.
- 27.61% premium over the 10-day volume-weighted average price (VWAP) of $4.31 on the TSX as of September 24, 2025.
- 28.81% premium over the 30-day VWAP of $4.27 as of the same date.
- 10.00% premium to the $5.00 per share cash consideration previously offered to shareholders under a prior arrangement agreement dated November 3, 2024 (the “Prior Transaction”).
This improved offer underscores ARC’s continued confidence in STEP’s strategic position within the energy services sector and reflects the value of the Company’s operational performance and future potential.
Addressing Mail Service Disruptions
Due to ongoing labour action by the Canadian Union of Postal Workers, Canada Post has been experiencing delays and disruptions in mail delivery services (the “Canada Post Disruption”). Recognizing the potential impact on the timely delivery of printed shareholder materials, STEP has implemented the notice-and-access delivery model, as permitted under National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer and National Instrument 51-102 – Continuous Disclosure Obligations.
Through this model, instead of mailing out physical copies of the Circular and related Meeting materials to every shareholder, STEP will send a Notice and Access Notification (NAA Notification). This document includes:
- The date, time, and location of the Meeting.
- The purpose of the Meeting and a summary of the matters to be voted on.
- Detailed instructions on how to access the full Circular and related documents electronically.
This approach ensures that shareholders can access all relevant information promptly and securely, while reducing reliance on physical mail delivery during the postal disruption. It also supports STEP’s ongoing commitment to environmental responsibility and cost efficiency.
Shareholders who prefer to receive a printed copy of the Meeting materials can do so by following the instructions provided in the NAA Notification. Printed copies will be mailed upon request, though delivery timelines may still be affected by the ongoing postal delays.
About the Meeting and Voting Process
The special meeting of shareholders will provide an opportunity for investors to review and vote on the proposed Arrangement. The Meeting will be conducted in accordance with applicable corporate laws, and both registered and non-registered shareholders are eligible to vote, either electronically, by proxy, or in person, depending on their registration status.
Details about voting deadlines, submission procedures, and proxy appointment methods are fully described in the Circular. STEP emphasizes the importance of shareholder participation, as approval of the Arrangement requires support from a significant majority of votes cast.
The Company’s Board of Directors, following the recommendation of an independent special committee and a fairness opinion provided by its financial advisor, has unanimously determined that the Arrangement is in the best interests of STEP and fair to shareholders (excluding ARC-related entities). Accordingly, the Board strongly recommends that shareholders vote in favor of the Arrangement at the Meeting.
Strategic Rationale and Benefits
STEP’s partnership with ARC Energy Fund 8 aims to deliver long-term stability and growth for the Company. ARC, one of Canada’s leading energy-focused private equity firms, brings deep sector expertise and financial resources that can strengthen STEP’s position in the competitive oilfield services market.
The transaction offers several anticipated benefits:
- Immediate and certain value: The all-cash offer provides liquidity at a premium valuation.
- No financing risk: The Purchaser Parties have secured the necessary funds to complete the transaction.
- Strong strategic fit: ARC’s continued investment ensures ongoing support for STEP’s operational and technological initiatives.
- Reduced market uncertainty: The transaction offers shareholders a clear exit path amid ongoing volatility in energy markets.
STEP’s management and Board believe this transaction represents a compelling opportunity for shareholders to realize full and fair value for their investment while positioning the Company for future success under ARC’s ownership and guidance.
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