EXCO: When Auctions Yield Less (XCO)

EXCO Resources Inc. (NYSE: XCO) is trading higher this morning but not by as much as many investors may have hoped.  The company announced that it will explore strategic alternatives to maximize shareholder value as it is considering and management-led buyout by CEO Douglas Miller.

The company’s Special Committee will consider the existing unsolicited proposal received on October 29, 2010 from Chairman and CEO Douglas Miller.  Mr. Miller offered to purchase all of EXCO’s outstanding common shares for a price of $20.50 per share in cash.

Now the special committee will accept for review potential offers from other interested parties and it will also consider other available strategic alternatives which may maximize shareholder value.’

Miller agreed to certain confidentiality and also agreed to standstill provisions that will prevent him from acquiring more shares at the current time of EXCO. The provisions also pertain to non-solicitation, proxies, influencing management in its review, and also included provisions not to recruit shareholder support for his tender.  As a defensive move, the company noted that it would be in the interest of shareholders to adopt a shareholder rights plan and require potential bidders to sign confidentiality and standstill agreements.

When the management-led buyout was announced at the end of October, shares effectively went from $15 to $19 overnight and the stock has been swinging around the $19 level since.  Shares are up 2.7% at $19.86 this morning.  The 52-week trading range is $13.25 to $21.34 and the market cap is $4.2 billion.

JON C. OGG