June 17, 2008
Last week, oil and gas servicer Precision Drilling Trust (NYSE: PDS ) proposed a stronger coalition with Grey Wolf (AMEX: GW ) than what the latter firm is looking for. You see, Grey Wolf has already agreed to merge with Basic Energy Services (NYSE: BAS ) . That arrangement's advantages are hard to see, aside from guaranteeing Grey Wolf's executives their jobs.
But now Precision and Grey Wolf have officially entered hostile territory. Grey Wolf rejected the Canadian driller's advances via a public statement two days after the bid was publicly disclosed. We now know that Precision followed up with a second, higher offer over the weekend. I should probably say marginally higher -- the offer price was only hiked a bit more than 3%, though the cash/share mix was also tilted a bit.
While I appreciate Precision's reluctance to throw its shares around, this is no way to torpedo a tie-up. That incremental offer was rejected right quick. Precision is going to have to pony up if it wants to partner up.
Back when I covered Yamana Gold's (NYSE: AUY ) Meridian marauding, I noted the company's mistake of calling one of its earlier bid iterations a "full, fair, and final price." Yamana went on to raise its offer several more times, signaling to Meridian that it could just sit tight. Precision doesn't have the luxury of time to dicker over dollars and cents -- Grey Wolf and Basic Energy shareholders meet on July 15 to approve their "merger of equals." Tick tock.
Over the next week or two, we'll learn just how committed Precision is to its speedy southerly expansion.
Precision is rated five out of five stars in Motley Fool CAPS, but it's not among your fellow Fools' top five oilfield service companies. That list is right here.