As part of the companies' merger agreement announced on
09/25/2012, Sidewinder Drilling Inc. has declared a cash tender
offer to acquire all of Union Drilling Inc. (
)'s outstanding common stock at $6.50 per share. The transaction
is expected to close by this year's fourth quarter.
Valued to be an approximately $242 million transaction, the new
share price is a .15% increase from its previous listing,
representing a 40% premium over a 60-day volume weighted average
share price, as well as a 26.8% premium 30-day volume weighted
average share price, according to a Union press release. This
places the stock price up more than $3 since August.
Union Drilling is a company based in Fort Worth, Texas, and
provides contract land drilling services and equipment to oil and
natural gas producers. The company has been operating almost a
decade longer than Sidewinder Drilling.
Headquartered in Houston, Texas, Sidewinder Drilling is a
privately owned drilling company that owns and operates a fleet
of land rigs targeting unconventional oil and gas resources
GuruFocus listings indicate that Union Drilling has a Financial
Strength rank of 4 out of 10, a Profitability and Growth rank of
3 out of 10, a P/E ratio of 92.6, a P/B ratio of a .8 and a P/S
ratio of .6. It has a market cap of $138.8 million.
Additionally, Union has attained four severe warning signs on
GuruFocus, indicating bankruptcy risks, cash flow divergence, per
share revenue decline and long-term debt. It also has one medium
warning sign that denotes a loss of operating income over the
past three years.
"For the remainder of 2012, we are seeing moderate weakness in
certain markets, but activity remains fairly stable," Union
President and CEO Christopher D. Strong said in a media release
reporting Union's 2012 second quarter results.
The report showed slight improvement compared to the company's
first quarter results, where Union reported a net loss in revenue
of $2.2 million in the first quarter of this year, which is $.10
per share. The company reported $4.6 million net loss in revenue
in last year's first quarter.
Strong said that these losses accounted for reasons that included
the shifting of rigs to oil and liquid plays, as well as the
expenses incurred during the transitional months between jobs
where rigs were idle.
The merger between Union and Sidewinder is a unanimous vote among
Union's Board of Directors, as well as Union Drilling
stockholders representing 51% of the Union's outstanding shares
to vote in favor of the transaction.
"The acquisition of Union Drilling is strategically complementary
for Sidewinder as it significantly increases our stake of
operations, geographically broadens our exposure in the North
American shale plays, meaningfully expands our customer base and
provides substantial synergies," Sidewinder Chairman and CEO, Jon
Cole said in the release. "After we complete our acquisition of
Union Drilling, we will have the scale and skilled workforce
necessary to more effectively serve our customers in multiple
Five days after the announcement of the merger, Guru investor
, of mutual fund company Royce & Associates, sold almost
950,000 of his shares of Union Drilling, an 85% reduction of his
Other Guru trades of Union include
of GAMCO investors, who currently holds 109,000 shares, and Steve
Cohen of SAC Capital Advisors, who sold all of his shares at
$6.48 per stock. Both trades were reported at the end of this
year's second quarter.
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