By OGJ editors
HOUSTON, Aug. 27 -- Pure Resources Inc. said Monday it wants a special committee of independent directors to evaluate a stock-swap acquisition offer from Union Oil Co. of California, a unit of Unocal Corp., valued by New York-based Fitch Ratings at slightly more than $400 million.
Based on Unocal's Aug. 20bid to acquire all minority shares of the Midland, Tex., independent, Pure stockholders will be offered 0.6527 share of Unocal common stock in a tax-free exchange for each outstanding share of Pure's common stock held. Unocal said it would issue some 12 million shares to complete the deal.
Through its subsidiary, Unocal already holds 65% of Pure's common stock. Unocal's offer, the company said, represents a value of $22.25/share, which is a 27% premium over Pure's Aug. 20 closing stock price.
Unocal said it expects to commence its exchange offer by Sept. 5, adding that it plans to "effect a short-form merger of Pure" once the exchange offer is completed.
A day after Unocal's announcement, Pure acknowledged receiving the offer and stated that by Sept 19, the company would "advise its stockholders of its position, if any, with respect to the exchange offer" and the reasons behind that position.
Meanwhile, Pure officials asked stockholders to "defer making a determination whether to accept or reject the exchange offer until they have been advised of (the company's) special committee's position. . ."
Analysts' reaction
Following Unocal's announcement, Fitch Ratings placed Pure's BBB- senior unsecured debt rating on rating watch positive. Fitch also affirmed Unocal's senior unsecured debt rating of BBB+, trust convertible preferred securities rating of BBB, and commercial paper rating of F2. "The rating outlook for Unocal remains stable," Fitch said.
"An upgrade of the Pure notes is dependent on the level of support provided by Unocal," Fitch noted, adding, "Currently, Pure's debt is non-recourse to Unocal and management has not indicated whether or not they will guarantee Pure's debt upon completion of the acquisition."
Merrill Lynch said, "Consolidation has long been an investment theme for the energy sector, and more specifically the (exploration and production) subsector," adding that Unocal's unit purchase price for Pure of $1.15/Mcfe falls "well within the range" of recent US merger and acquisition activity. According to Merrill Lynch, over the last 2 years, 21 sets of companies have been involved in M&A deals, averaging a value of $1.26/Mcfe.