EPL Offers to Acquire Stone Energy for $52 Per Share in Cash and Stock; Equity Value of Approximately $1.4 Billion
25 Maggio 2006 - 1:32PM
Business Wire
Provides Premium of Approximately 26% to Current Value of
Plains/Stone Agreement and is Expected to Be Immediately Accretive
to Cash Flow Per Share Proposed Combination Creates Premier
Offshore E&P Company, Accelerates Diversification and Growth
within Gulf of Mexico Shelf Energy Partners, Ltd. ("EPL")
(NYSE:EPL) announced today that it has made an offer to the Board
of Directors of Stone Energy Corporation ("Stone") (NYSE:SGY) to
acquire all of the outstanding shares of Stone for a combination of
cash and stock valued at $52.00 per Stone share. Under the terms of
the EPL proposal, each share of Stone common stock will be
exchanged for $26.00 in cash and a variable number of shares of EPL
common stock having a value of $26.00 based on the average closing
price of EPL stock over the 20 trading days preceding the closing
of the merger. The number of EPL shares to be issued for each Stone
share will range from a maximum of 1.287 to a minimum of 1.053,
assuming 27.7 million fully diluted Stone shares. This would equate
to 1.21 EPL shares for each Stone share, based upon the closing
price of EPL's stock on May 24, 2006. Stone shareholders will be
given the option to elect to receive the consideration in cash or
EPL common stock, subject to the limitation that the total value of
the cash consideration payable for the shares will be approximately
$720 million. EPL's offer represents a premium of approximately 26%
over the $41.20 per share value proposed to be paid for Stone
shares under the merger agreement between Plains Exploration and
Production Company ("Plains") (NYSE:PXP) and Stone, based on the
closing price of Plains's common stock on May 24, 2006; a premium
of approximately 10% over the closing price of Stone's common stock
on April 21, 2006, the last trading day prior to the announcement
of the proposed Plains/Stone agreement; and a premium of
approximately 28% over the May 24, 2006 closing price of Stone's
common stock, the last trading day before the EPL offer was made
public. The proposed transaction is valued at approximately $2.0
billion, which includes approximately $1.4 billion in equity and
the assumption of approximately $563 million of Stone debt. This
represents aggregate additional consideration of $300 million over
the current value provided to Stone shareholders under the
Plains/Stone agreement. On a pro forma basis, the combined company
will be the third most active driller of operated wells in federal
and state waters in the Gulf of Mexico (based on 2005 figures). The
transaction is expected to be immediately accretive to EPL's cash
flow per share. Assuming the timeline set forth in the offer
letter, it is anticipated that the proposed transaction will close
in the third quarter of 2006. The equity portion of the transaction
is expected to be structured to be tax free to Stone shareholders
who elect to receive EPL shares. "The financial benefits of this
offer are extremely compelling for Stone shareholders," said
Richard A. Bachmann, EPL's Chairman and Chief Executive Officer.
"Our offer clearly provides Stone shareholders superior value over
that contemplated by the Plains/Stone agreement, including a
substantial premium, the certainty of cash, and a variable exchange
ratio subject to a collar to provide downside protection. In
addition, given our highly complementary operating assets, we
expect to achieve significantly greater synergies than those
identified in the Plains/Stone agreement. "The combination of Stone
and EPL will create a premier offshore E&P company capable of
generating considerable upside value for shareholders of both
companies. This transaction will accelerate the diversification and
growth of our presence in the Gulf of Mexico Shelf and add proved
reserves at an attractive price. We will also gain significant
option value through Stone's onshore Rockies position. Furthermore,
the acquisition of Stone will increase our scale and scope and
enhance our competitive position in all facets of exploration and
development. "We are confident that Stone's Board and shareholders
will find this offer superior to the Plains transaction," concluded
Mr. Bachmann. "For EPL shareholders, this transaction represents
the opportunity to become a leading player in the industry and
create even greater long-term value. We look forward to the Stone
Board and management team carefully considering our offer and to
moving quickly with them towards a definitive merger agreement."
Below is the text of the letter that was sent to James H. Stone,
Chairman of Stone's Board of Directors. -0- *T May 24, 2006 Board
of Directors Stone Energy Corporation 625 E. Kaliste Saloom Road
Lafayette, LA 70508 Attention: James H. Stone Chairman of the Board
Dear Jimmy: We are pleased to submit this offer to combine the
businesses of our two companies, subject to the terms and
conditions discussed below. Our offer clearly meets the standard
for a Target Superior Proposal as contemplated by your merger
agreement with Plains. We propose to acquire all the shares of
Stone for a combination of cash and stock at a price of $52.00 per
Stone share, subject to a limit on the number of EPL shares to be
issued. Under the terms of our offer, each Stone share will be
exchanged for $26.00 in cash and a variable number of shares of EPL
common stock having a value of $26.00 based on the average closing
price over the 20 trading days preceding the closing of the merger,
provided that the number of EPL shares to be issued for each Stone
share will range from a maximum of 1.287 to a minimum of 1.053,
based on our assumption of 27.7 million fully diluted Stone shares.
Based on our closing price today, that would equate to 1.21 EPL
shares for each Stone share. We will provide the opportunity for
each Stone shareholder to elect whether to receive the
consideration in cash or common stock of EPL, subject to the
limitation that the total value of the cash consideration payable
for the shares will be approximately $720 million. We intend to
structure the transaction so that receipt of our shares would be
tax free to your shareholders who elect to receive shares. We call
your attention to the following: -- Our offer ($52.00 per Stone
share) represents a 26.21% premium over the current value of the
Plains offer ($41.20 per Stone share based on today's closing price
for Plains' shares). -- Our offer represents aggregate additional
consideration of approximately $300 million to Stone's
shareholders. -- Fully 50% of our offer is in cash, which combined
with our variable exchange ratio (subject to a collar), will
substantially protect the offer value from changes in EPL's share
price. -- Given the overlapping nature of a significant portion of
our asset base, we believe there are material overhead and
operating cost savings that will create additional value for
Stone's shareholders who continue as EPL shareholders. Our offer is
not subject to any financing contingency. We have received a
commitment letter from Bank of America, N.A. and affiliates for the
financing necessary to consummate the proposed transaction. We have
carefully reviewed all information filed by Stone with the SEC, and
believe that we can complete our due diligence review of your
Company promptly. We are available to commence our due diligence
review immediately, and we are confident that, assuming full
cooperation, we can complete our review within 7 to 10 days. We are
also prepared to give you and your representatives full access to
our non-public information for purposes of your due diligence
review of us. Our board of directors has approved the submission of
our offer. Any definitive transaction between EPL and Stone would,
of course, be subject to final approval by our board and our
shareholders. We are prepared to enter into a merger agreement
reflecting the above terms and which would otherwise be
substantially similar to the merger agreement that you entered into
with Plains. We believe that the proposed transaction could close
in the third quarter of 2006. This letter is not intended to, and
does not, create or constitute any legally binding obligation,
liability or commitment by us regarding the proposed transaction,
and, other than the confidentiality agreement we will enter into
with you, there will be no legally binding contract or agreement
between us regarding the proposed transaction unless and until a
definitive merger agreement is executed. We and our financial
advisors, Evercore Group L.L.C. and Banc of America Securities LLC,
and our legal advisors, Cahill Gordon & Reindel LLP, are
prepared to move forward immediately with our offer. We believe
that it presents a compelling opportunity for both our companies,
and look forward to your prompt response. Very truly yours, /s/
Richard A. Bachmann Richard A. Bachmann Chairman of the Board and
Chief Executive Officer cc: David H. Welch, President and Chief
Executive Officer, Stone Energy Corporation *T The proposed
transaction is not subject to any financing contingency. EPL has
received a commitment letter from Bank of America, N.A. and
affiliates for the financing of the transaction. Evercore Group
L.L.C. and Banc of America Securities LLC are acting as financial
advisors to EPL and Cahill Gordon & Reindel LLP is acting as
legal counsel. EPL executives will be discussing the proposed
transaction with analysts and investors on a conference call at
9:30 a.m. ET / 8:30 am CT today, May 25, 2006. To access the
conference call, please dial 888-344-1107 (U.S. dial-in) or
973-582-2859 (international dial-in) beginning at 9:15 a.m. ET /
8:15 am CT and ask to be connected to the Energy Partners
conference call (conference ID# 7439634). A replay of the call will
be available until June 1, 2006 by dialing 877-519-4471 (U.S.
dial-in) or 973-341-3080 (international dial-in) (conference ID#
7439634). Accompanying slides will be available on EPL's website,
www.eplweb.com. The Company will also webcast the call to all
interested parties through its website. Please see the website for
details on how to access the webcast. Founded in 1998, EPL is an
independent oil and natural gas exploration and production company
based in New Orleans, Louisiana. The Company's operations are
focused along the U. S. Gulf Coast, both onshore in south Louisiana
and offshore in the Gulf of Mexico. Any statements made in this
news release, other than those of historical fact, about an action,
event or development, which the Company hopes, believes or
anticipates may or will occur in the future, are "forward-looking
statements" under U. S. securities laws. Such statements are
subject to various assumptions, risks and uncertainties, which are
specifically described in our Annual Report on Form 10-K for fiscal
year ended December 31, 2005 filed with the Securities and Exchange
Commission. Forward-looking statements are not guarantees of future
performance or an assurance that the Company's current assumptions
and projections are valid. Actual results may differ materially
from those projected.
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