New Orleans-based Energy Partners Ltd. (EPL) terminated an agreement to buy Stone Energy Corp. on Thursday and is exploring other alternatives, including a sale. However, EPL continued to advise shareholders to reject a takeover bid by Australia’s Woodside Petroleum Ltd., calling it too low.
EPL in June successfully carved out a deal to purchase Lafayette, LA-based Stone for $2.2 billion after outbidding Stone’s original suitor Plains Exploration (see Daily GPI, June 26). EPL in turn was pursued by Woodside subsidiary ATS Inc. Energy Partners, but EPL rejected a takeover bid of $880 million last month (see Daily GPI, Sept. 15; Sept. 1). The Woodside bid was contingent on EPL not completing the Stone merger.
Woodside’s $23/share offer for EPL was extended two weeks ago to Oct. 20 after a court ruling allowed EPL to enter into third-party talks (see Daily GPI, Oct. 3).
In heavy trading Thursday, EPL’s shares gained 94 cents, nearly 4%, to close at $25/share. Stone’s shares were up 2.5%, or 96 cents, to close at $39.50.
“While dual path negotiations helped to assure the floor valuation for EPL shares, the absence of [Stone] SGY is nevertheless good news for EPL shareholders,” noted Friedman, Billings, Ramsey & Co. Inc. analysts David Khani and Andrew Coleman. In a note to clients, they said they remained “confident that the current $23-$24/share bid for EPL is too low and will be raised,” likely to around $26/share.
In a research note, Merrill Lynch’s John Herrlin said, “It’s clear that EPL now recognized that the merger wasn’t well received and, as we’ve pointed out, very earnings dilutive.” Since it was given the go-ahead to speak to other parties, “EPL’s management has obviously rethought its strategies as an ongoing entity or potential sales target with ATS or others.”
EPL will pay Stone an $8 million termination fee. EPL and Stone also have agreed to release all claims between them relating to their merger agreement. The $8 million payment is a $17.6 million discount from the fee that would have been payable to Stone under certain circumstances, EPL stated.
“While the EPL board believed that the addition of Stone’s complementary properties and assets would have been an excellent strategic fit for us, the board has concluded that the exploration of strategic alternatives is in the best interests of EPL stockholders,” EPL said in a statement.
EPL’s board of directors, assisted by financial advisers Evercore Group LLC, Banc of America Securities LLC, Petrie Parkman & Co. Inc. and UBS Securities LLC, has directed the company to “explore strategic alternatives to maximize stockholder value, including the possible sale of the company.” It said EPL’s “solid track record of operational success and the strong potential of our attractive Gulf of Mexico properties and prospects place us in a strong position to explore strategic alternatives to maximize value for our stockholders.”
EPL said it would not disclose any developments regarding its negotiations until the board makes a decision regarding a specific course of action.
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