Forest Oil's offer for Houston Exploration is oversubscribed; merger set to close June 6

By Lisa Kerner

Charlotte, N.C., June 6 - Forest Oil Corp. said preliminary results show that the stock component of its merger deal with Houston Exploration Co. is oversubscribed.

Of the 28,559,499 shares of Houston Exploration common stock outstanding on June 5, holders of 2,129,055 shares elected to receive cash and holders of 22,911,988 shares elected to receive shares of Forest Oil common stock. The totals do not include elections made by guaranteed delivery.

As a result, Houston Exploration stockholders who elected to receive all of their merger consideration in shares of Forest Oil common stock will receive a combination of cash and stock. Stockholders who elected to receive all cash, or failed to make a valid election, will receive $60.0239 cash per share.

Based on the estimated number of shares of Houston Exploration common stock outstanding on June 5 and the preliminary election results, Forest expects to pay a total of roughly $750 million in cash to Houston Exploration stockholders and issue approximately 24 million shares of Forest common stock.

The amount of the stock over subscription and the exact allocation of the stock merger consideration will not be known until final results of the election process are determined at the end of the guaranteed delivery period, a company news release stated.

Both Forest Oil and Houston Exploration expect to complete the merger on June 6.

Under the companies' agreement, Forest Oil will acquire 100% of the outstanding stock of Houston Exploration in a stock and cash transaction valued at about $1.5 billion including debt.

At the time the agreement was announced, Houston Exploration shareholders were slated to receive 0.84 of a share of Forest Oil common stock and $26.25 in cash for each share of Houston Exploration common stock for total consideration of roughly $52.47 per share.

The agreement also calls for Forest Oil to grant a stock option to each Houston Exploration employee who has remained continuously employed by Forest Oil and its subsidiaries from the effective time of the merger to the date of the grant. Forest Oil will also grant a stock option to employees who held, immediately prior to the effective time of the merger, an unexercised Houston Exploration stock option with an exercise price equal to or greater than $54.18 per share.

Houston Exploration is an independent natural gas and crude oil producer based in Houston.

Denver-based Forest Oil is engaged in the acquisition, exploration, development and production of natural gas and crude oil primarily in North America.

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