(Corrects premium percentage in second paragraph to July trading price)
By Gary McWilliams
HOUSTON, Nov 14 (Reuters) - U.S. shale producer Callon Petroleum on Thursday cut its buyout offer for rival Carrizo Oil & Gas and postponed a shareholder vote in a last ditch effort to win support for the deal.
The first major shale merger since Occidental Petroleum Corp's purchase of Anadarko sent Callon's shares tumbling. Its bid was seen as a test of whether investors who have opposed shale mergers would accept an all-stock deal that promised higher earnings and cash flow.
The new terms of the all-stock deal value the purchase at about $723 million, a 7% premium to the trading price before the deal was disclosed, down from the original 25% premium offered. It would leave Callon shareholders with 58% of the combined company, up from the original 54%.
The original merger was opposed by Paulson & Co, Callon's third-largest shareholder, while proxy advisory firms Glass Lewis & Co and Institutional Shareholder Services urged a "no" vote. The agreement reschedules the shareholder vote to Dec. 20 from Thursday.
"In light of today's market environment, the revised terms offer compelling near- and long-term value for Carrizo shareholders," Chip Johnson, Carrizo chief executive, said in a statement.
Terms of the new deal provide Carrizo shareholders 1.75 Callon shares for each share held, down from the previous offer of 2.05 Callon shares. Callon would pay up to $10 million of Carrizo's expenses if its shareholders reject the deal.
In September, Paulson called on Callon to abandon the offer and consider selling itself, arguing the 25% premium to Carrizo's share price was too steep and would increase Callon's debt. Paulson recently held a 9.5% stake.
The combination would have Callon relinquish its status as a Permian Basin pure-play, Paulson said, making it less attractive to potential acquirers. The Permian Basin is the top U.S. shale field.
Paulson was unavailable for immediate comment on the new terms.
Callon's shares have fallen about 29% from $6.40 on the day before the deal became public. They traded at $4.46 on Wednesday, but were up 2% premarket on Thursday.
A shareholder rejection could put both companies in play. Carrizo had held discussions at least seven other companies and had received three non-binding proposals before accepting Callon's bid, according to a regulatory filing.
Callon's offer was the first Permian takeover proposal since Occidental closed its $38 billion purchase of Anadarko Petroleum without a vote by its own holders. That deal that has knocked Occidental shares down more than 40%. (Reporting by Shradha Singh in Bengaluru and Gary McWilliams in Houston; Editing by Toby Chopra and Steve Orlofsky)