The first sign of a US shale consolidation wave
Fund Manager Paulson & Co. Inc, a shareholder in Callon Petroleum, drops its opposition to a merger between Callon and Carrizo Oil & Gas which could be the start of consolidation among smaller slate players following the massive Occidental-Anadarko agreement.
Paulson & Co, which owned 9.5 percent of Callon Petroleum earlier in November, said on Monday that they are no longer opposed to the deal and would vote for the proposed merger with all shares after the two energy companies revised the terms of the agreement on to give a lower premium to Carrizo shareholders.
However, Paulson wants to cut its shares in Callon.
The first announcement of the proposed merger was made in July. The terms of the initial agreement valued Carrizo at $ 1[ads1].2 billion.
But Paulson has opposed the terms of the proposed agreement, saying that a standalone Callon would be less risky by focusing only on Perm.
In a bid to save the deal, Callon and Carrizo changed the terms of the deal last week, reducing the exchange rate for the merger with all shares, which now means a much lower premium for Carrizo shareholders – 6.7 percent, compared to 25 percent premium in the beginning terms of the agreement.
Paulson has argued that the originally proposed steep premium was not worth using, and Callon would no longer be a purely permeable toy manufacturer after retrieving Carrizo.
The revised terms of merger were satisfactory to Paulson, who today said that it is no longer against the agreement, but it cut its stake in Callon, although it was unclear how much.
"While Paulson believes that a purely permically focused manufacturer would be a more attractive alternative, Paulson respects that different shareholders may have different views on this matter. As such, although Paulson is no longer opposed to the transaction, it has reduced its Callon and the Carrizo agreement were expected to be the litmus test of a possible new wave of mergers and acquisitions (M&A) in the US ski trip after Occidental and Anadarko completed one of the August largest oil contracts in recent years.
By Tsvetana Paraskova for Oilprice.com
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