Union Pacific Resources Group (UPR) closed on its acquisition ofNorcen Energy Resources. The companies’ boards approved the dealJan. 26. UPR initiated a tender offer for the 51.5% of Norcen’s stock not owned or controlled by Noranda Inc., a shareholder of49.5% Norcen common stock.

Noranda had signed an irrevocable agreement to tender its 49.5percent of Norcen stock to UPR. In total, 95.5 percent of Norcen’sstock was tendered to UPR at the price of $13.65/share. UPR nowowns about 96.8% of the issued and outstanding common shares ofNorcen on a fully diluted basis. The deal’s overall value is $2.6billion plus the assumption of Norcen’s outstanding debt of about$900 million. “We have said Norcen represents an excellentstrategic fit for UPR and we are pleased to have the transactioncomplete,” said Jack L. Messman, UPR CEO. “UPR is now a wellbalanced North American company with a diversified reserve andproduction base.”

Moody’s Investors Service, however, downgraded the seniorunsecured long-term debt ratings of UPR from Baa1 to Baa2. Therating outlook is stable. “The ratings downgrade reflects thesignificant increase in leverage, and the two-year time frame formanagement’s delevering plan, in a weak price environment,” Moody’ssaid. “The downgrade also reflects a more aggressive financialstrategy, as demonstrated by the unsuccessful all-cash bid forPennzoil, and the all-cash Norcen transaction. Failure to achieveplanned proceeds from asset sales or expected improvements in thebalance sheet on a timely basis could result in further negativerating action.”

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