Shares of QEP Resources (NYSE:QEP) rocketed nearly 40% higher by 10:15 a.m. EST on Monday. Fueling the surge in the oil company's stock was an offer by one of its largest investors to take it private.
Hedge fund Elliott Associates has offered to acquire 100% of QEP Resources' outstanding shares for $8.75 apiece. The fund, which is already one of QEP's largest shareholders, believes that a sale of the company is the best course of action to maximize its value. The proposed acquisition, which represents a 44% premium to QEP's closing price last Friday, is on the condition that the company closes on the sale of its assets in the Haynesville Shale.
Elliott believes that despite QEP's efforts to transform into a pure play on the Permian Basin, the company's stock remains significantly undervalued. Elliott sees the take-private transaction providing the bulk of the company's investors with a compelling premium for their shares. Meanwhile, the move would give Elliott full control of the company so that it can further maximize value.
Elliott's proposed acquisition of QEP Resources is a step to prod the company to consider selling, either to Elliott or another bidder at a higher price. However, there is no guarantee that the company will pursue a sale since it's still in the midst of its transformation plan, which would see it sell all its assets outside of the Permian and use that cash to retire debt, buy back stock, and finance growth. As a result, it's entirely possible that the company might opt to remain public, which could quickly erase today's gains.