24/7 Wall St. » GW

Grey Wolf Nearly, Finally Merged (GW, PDS, BAS)

247wallst — Tue, 23 Dec 2008 11:28:07 +0000

The shareholders of Grey Wolf, Inc. (NYSE:GW) have overwhelmingly chosen to accept cash instead of stock in Precision Drilling Trust (NYSE:PDS) as consideration for Precision’s buyout of Grey Wolf. We’ve been following the story for some months now, but Grey Wolf shareholders approved the merger this morning and the deed is now done.

But for a lot less than everybody originally planned. Precision’soriginal offer was worth $9.02 in cash or 0.4225 of a Precision commonunit. The final deal for common units went down at $2.98. That’s whythe choice of cash was oversubscribed. Grey Wolf shareholders will getsome pro-rated portion of $5 cash/share of Grey Wolf stock and 0.1883of a Precision common unit.

If Grey Wolf shareholders had approved a July agreement with BasicEnergy Services, Inc. (NYSE:BAS), they wouldhave received better than $7.00 per share. Precision’s share price is offnearly 5% this morning, trading at around $6.80/share.

Paul Ausick
December 23, 2008

Posted in Mergers and Buy Outs, Oil & Gas Tagged: BAS, GW, PDS

Precision Drilling: The Grey Wolf Saga Continues (PDS, GW)

247wallst — Wed, 03 Dec 2008 10:48:00 +0000

The merger between Precision Drilling (NYSE:PDS) and Grey Wolf (NYSE:GW) could turn into the longest running soap opera on Wall Street. Our story last month summed up the action so far. Last night, Precision announced that the shareholders’ meeting was beingmoved to December 23rd, and that the merger terms were being amended.So far, only 54% of Grey Wolf shares have approved the deal, and theshareholder meeting was scheduled for December 9th.

The change to the merger agreement alters terms relating to the cashpaid to Grey Wolf convertible note holders who do not convert theirnotes to Grey Wolf stock before the merger. Precision will keep thecash to buy the convertible notes after the merger is completed. Thischange is not likely to influence many votes one way or the other.

Precision’s common units closed at $8.26/unit yesterday, making theoffer for Grey Wolf worth about $6.55/share, about a third less thanthe offer was worth when it was first made. The longer this soap operacontinues, the less the deal is worth to Grey Wolf shareholders.

Paul Ausick
December 3, 2008

Posted in Mergers and Buy Outs, Oil & Gas Tagged: GW, PDS

Will Grey Wolf and Precision Drilling Finally Tie the Knot? (GW, PDS, BAS)

247wallst — Mon, 17 Nov 2008 09:02:17 +0000

The buyout of US driller Grey Wolf (NYSE:GW) by Canadian drilling company Precision Drilling Trust (NYSE:PDS) got its start back in April, when oilfield services company Basic Energy Services (NYSE:BAS) made an offer to buy Grey Wolf. While Grey Wolf shareholders were considering that offer, Precision Drilling made an unsolicited bid for Grey Wolf that eventually topped out at $10/share.

One proxy advisory firm, ISS Riskmetrics, counseled against the GreyWolf-Basic Energy tie-up, citing a possible conflict of interest fromGrey Wolf’s board. Ultimately, the deal was rejected by Grey Wolfshareholders, nearly 100% of which are institutional investors.

Then, Precision Drilling got serious, offering about $2 billion in cashand stock for Grey Wolf. Theinteresting thing about the offer was that it was about $1/share lowerthan the offer Precision Drilling had made earlier. The competitivelandscape had changed after all.

Then last Friday, ISS Riskmetrics and Proxy Governancerecommended that Grey Wolf shareholders accept the offer fromPrecision Drilling. Riskmetrics supports the deal because "the proposedoffer seems to have supported the Grey Wolf stock price as evidenced bythe fact that Grey Wolf’s stock price has declined significantly lessthat the average stock price decline of its peer group." Yes, that’strue, but Precision’s share price is down nearly 70% from 52-week highsit reached before it made its first unsolicited bid for Grey Wolf.

Proxy Governance supports the deal because it "appears to place a fairvalue on the company based on the overall market reaction." Themarket’s reaction since July has been to send Grey Wolf’s share pricedown about 37% from 52-week highs. Over the last twelve months, though,Grey Wolf’s share price has actually increased by 11%, while PrecisionDrilling has lost more than 45%.

Absent a last-minute offer from another buyer, this deal is expected toclose December 10th, the day after Grey Wolf’s shareholder meeting tovote on the buyout.

Paul Ausick
November 17, 2007

Posted in Mergers and Buy Outs, Oil & Gas Tagged: BAS, GW, PDS

Top Early-Bird Analyst Upgrades & Downgrades (COMV, CRM, V, BRCM, GW, IDTI, MRVL, QELP, STI)

247wallst — Tue, 26 Aug 2008 06:34:26 +0000

These are some of the top analyst calls we are seeing this Tuesday morning:

Comverge (COMV) started as Buy at Jefferies.
Salesforce.com (CRM) Raised to Buy at Citigroup.
Visa (V) started as Outperform at William Blair.

Broadcom (BRCM) Cut to Perform at Oppenheimer.
Grey Wolf (GW) Cut to Hold at Jefferies.
Integrated Device Tech (IDTI) Cut to Perform at Oppenheimer.
Marvell Tech (MRVL) Cut to Hold at Jefferies.
Quest Energy Partners, L.P. (QELP) Cut to Market Perform at Wachovia.
SunTrust Banks (STI) Re-initiated as Sell at Citigroup.

Jon C. Ogg
August 26, 2008

Grey Wolf Finally Gets its Wish, Sort Of (GW, PDS, BAS)

247wallst — Mon, 25 Aug 2008 10:05:18 +0000

The board of directors of Grey Wolf, Inc. (AMEX:GW) has been trying to sell the company for at least a couple of months at a higher price. Today, they appear to have gotten their wish. Sort of. Canada’s Precision Drilling Trust (NYSE:PDS) and Grey Wolf have announced a definitive agreement under which Precision will acquire Grey Wolf for $5/share in cash and 0.1883 new units in Precision for each share of Grey Wolf. That comes to $1.12 billion in cash and 42 million units, worth about another $897 million. In other words, $9.02 before any dilution and before the 7% "PDS" drop today.

The deal has had its ups and downs. In April, Grey Wolf’s board hadagreed to a merger with Basic Energy Services (NYSE:BAS). Precisioninserted an unsolicited bid for Grey Wolf in June, and then sweetened the offera couple of times. Finally, in July, Grey Wolf’s shareholders rejectedBasic’s bid. Today’s deal represents an increase of about 4.5% in thetotal number of units included in Precision’s last offer.

In it’s press release today, Precision noted that Grey Wolf’s board"believes this consideration represents a substantial premium over an‘unaffected’ Grey Wolf stock price without the influence of Precision’sprevious public announcements regarding its desire to acquire GreyWolf." What the heck is the "unaffected" stock price? On June 8th, theday before Precision’s initial offer was announced, Grey Wolf stockclosed at $8.28. Last Friday, Grey Wolf closed at $8.59. Is either ofthose prices "unaffected? Or maybe the "unaffected" stock price is$7.60/share, the price of a share before the first Basic Services offer?

Precision’s previous offer for Grey Wolf used a 2008 cash flow multipleof 8.1 to derive a premium of 34% above Grey Wolf’s 30-day averageclosing stock price on June 8th. Today’s offer actually reducesPrecision’s last offer by about $1/share. Grey Wolf shareholders getless cash, but a larger stake in the combined company.

We had noted to readers of our weekly "10 Stocks Under $10"newsletter that many investors were hoping for $10.00 or even a bit higher.Because virtually all of Grey Wolf’s stock is held by institutionalinvestors, this offer could be deemed to be too low still. In earlytrading today, Grey Wolf is down by about $0.15, and Precision is downmore than $1.25.

Paul Ausick
August 25, 2008

Basic Energy Reports on June Operations; Gets Flak/Props on Grey Wolf Merger (BAS, GW, PDS, RMG)

247wallst — Wed, 09 Jul 2008 10:08:52 +0000

Oilfield services company Basic Energy Services (NYSE:BAS) released its June operations report this morning. The company has increased its rig count by one over May, and thirty since a year ago. Rig utilization stands at 79%, and drilling utilization is down a few points from May, but up from 63% to 83% over June 2007. These are solid numbers, and the company’s president and CEO expects improvements in pricing to offset higher fuel and labor costs.

The interesting news is behind the numbers (as usual). In April, Basic announced a "merger of equals" with Grey Wolf (NYSE:GW), a well driller. The surviving entity will retain the Grey Wolf name and NYSE ticker. Grey Wolf shareholders will receive $1.82 in cash plus one share of stock in the new company in exchange for four shares of existing Grey Wolf stock. Basic stockholders receive $6.70 in cash and 0.91975 shares of stock in the new company for each share of Basic stock. Then, in early June, Canada’s Precision Drilling Trust (NYSE:PDS) made an unsolicited offer of $9.00/share in cash and stock for Grey Wolf. Precision has bumped its offer twice, and it now stands at $10.00/share. Precision, like Grey Wolf, is a drilling company, and the conventional wisdom seems to be that the deal between Precision and Grey Wolf makes more sense than the Grey Wolf/Basic deal because there is little chance for cost-cutting in the Basic merger.

On Monday, RiskMetrics (NYSE:RMG) weighed in with a report questioning the Basic/Grey Wolf merger, and raising questions of conflict of interest on Grey Wolf’s Board. Yesterday, Egan-Jones Proxy Services recommended that Grey Wolf stockholders approve the Basic merger at the special meeting called for July 15th. Grey Wolf issued a press release citing Egan-Jones’ recommendation.

The combination of Precision Drilling and Grey Wolf yields a larger drilling company, but it’s hard to see how there will be significant cost savings. The Basic/Grey Wolf merger gives Grey Wolf some additional drilling capability, plus services such as completion, workovers, and abandonment. Strategically, the latter deal seems to position the merged company better, but it won’t pay off in a quarter or two. To some shareholders, that quick payoff trumps everything else.

Paul Ausick
July 9, 2008