Will Costly Oil Ruin Chances of QEP Resources (QEP) Buyout?
Last December, QEP Resources QEP reached an agreement with Diamondback Energy, Inc. FANG wherein the latter will acquire the former in an all-stock deal worth $2.2 billion comprising $1.6-billion net debt as of Sep 30.
This move will provide QEP Resources shareholders with 0.05 shares of Diamondback common stock for each share held, accounting for an implied value to each QEP Resources stockholder of $2.29 per share as of the closing price on Dec 18.
QEP Resources’ president and CEO Tim Cutt states that “we believe that this strategic merger with Diamondback, along with the addition of the Guidon assets, provides our shareholders with an exciting investment opportunity, now and in the future. The large contiguous Tier-1 acreage position in the Northern Midland Basin is expected to lead to operational synergies and deliver capital efficiencies beyond what each company could achieve independently.”
However, lately, a conflict of interest was noticed between two shareholders of QEP Resources on the proposed acquisition of the company.
Institutional Shareholder Services, which is a QEP Resources shareholder, informed that it will vote in favor of the proposed acquisitionsignifying the transaction’s “credible strategic rationale and multiple levers for value creation”. Also, the company continues to recommend its shareholders to vote in favor of this transaction at the upcoming special meeting of QEP Resources stockholders on Mar 16.
In contrast, Glazer Capital LLC, which owns 5.7% of QEP Resources’ outstanding shares, decided to vote against the proposed deal as it considers it to be materially inadequate. The stakeholder believes that the recent surge in crude price makes the firm more valuable than the deal amount clinched in December.
The outcome of this contention will only be known next week following the special meeting of QEP Resources.
Brief on the Company
QEP Resources is a leading independent energy company engaged in exploration, development and production of natural gas, crude oil and natural gas liquids. Its operations are currently focused on the Northern (primarily in North Dakota) and the Southern regions (mainly in Texas) of the United States.
Zacks Rank & Key Picks
QEP Resources currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Matador Resources Company MTDR, Diamondback Energy, Inc. FANG and Denbury Inc. DEN, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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