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Equity Fund Tries to Thwart Double Eagle, Petrosearch Merger

Private equity fund Tiberius Capital LLC has launched a tender offer to acquire a controlling interest in Petrosearch Energy Corp. to prevent Double Eagle Petroleum Co. from purchasing the company.

Denver-based Double Eagle agreed to buy Petrosearch in late March in a stock transaction valued at $9.3 million (see Daily GPI, April 1). Houston-based Petrosearch, which is traded over the counter (OTC), had net proved reserves of around 2.2 million boe at year-end 2007. Operations are focused in the Anadarko Basin in North Texas. Besides increasing its reserves, the transaction would add $8.75 million to Double Eagle's working capital base.

The Chicago-based fund said it wanted to acquire about 15 million outstanding shares of common stock of Petrosearch and would pay 33 cents/share net. The shares that Tiberius is offering to purchase, together with the shares that it currently owns, would total 51%. A key condition to the tender offer is that Petrosearch stockholders vote against the proposed merger with Double Eagle.

"We are making the tender offer because we are extremely disappointed in the Double Eagle merger price," said John M. Fife, who is one of the Tiberius principals. "The proven oil and gas reserves of Petrosearch are significantly undervalued in the proposed merger, to the detriment of Petrosearch stockholders. Other potential strategies that we may cause Petrosearch to pursue include a partial repurchase of shares, an extraordinary dividend, liquidation, selling or licensing Petrosearch's oil and gas properties, and/or a merger or other business combination."

The tender offer is scheduled to expire on Aug. 7. Tiberius said it would reserve the right to purchase more than 15 million shares of Petrosearch stock, if more are tendered. The 33 cent/share offer by Tiberius represents a 74% premium to Petrosearch's closing price on Friday, which was 19 cents/share on the OTC Bulletin Board.

Earlier this month Petrosearch said a special shareholder meeting to consider the Double Eagle offer would take place in July, depending on the timing of the Securities and Exchange commission review process of its preliminary proxy.

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