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Third Point opposes acquisition of Bronco Drilling by Allis-Chalmers
By Lisa Kerner
Charlotte, N.C., Jan. 25 - Bronco Drilling Co. investor Third Avenue Management LLC expressed disappointment in the terms and structure of the company's proposed acquisition by Allis-Chalmers Energy Inc. in a Jan. 25 letter to Bronco Drilling chairman and chief executive officer Frank Harrison.
The letter was included as part of a schedule 13D filed with the Securities and Exchange Commission.
Third Point owns more than 5.5 million common shares of Bronco Drilling, or a 21.18% ownership interest.
According to the investor, the deal undervalues Bronco Drilling's stock and its does not allow "for Bronco Drilling's shareholders to fully participate in the long-term growth of the combined entity."
Third Point recommends that Bronco Drilling fully consider all other unsolicited bids it may receive, consider other alternatives to a sale and re-evaluate the structure and terms of the existing deal.
Third Point said it may meet with Bronco Drilling's board or "communicate publicly or privately" with Bronco stockholders or third parties to express its views on the proposed acquisition, the letter said.
On Jan. 24, Allis-Chalmers agreed to acquire Bronco Drilling in a cash and stock deal valued at $437.8 million, or $16.33 per share.
The per-share price is a 21.8% premium to the closing price of Bronco Drilling's common stock on Jan. 23, according to a company news release.
Total merger consideration will consist of $280.0 million in cash and Allis-Chalmers common stock valued at $157.8 million.
The merger is slated to close in mid-2008.
Allis-Chalmers shareholders will own about 72.1% of the combined company, with Bronco Drilling's stockholders owning the remaining 27.9%.
Houston-based Allis-Chalmers provides services and equipment to oil and natural gas exploration and development companies.
Bronco Drilling, located in Edmond, Okla., provides contract land drilling and workover services to oil and gas exploration companies.
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