Chesapeake Energy Corp. (CHK) said it will buy Bronco Drilling
Co. (BRNC) for about $315 million as it looks to increase its rig
count.
Under the terms of the deal, Chesapeake will pay $11 for each
Bronco outstanding share. That's a 5.8% premium to Thursday's
closing price.
Chesapeake--the No. 2 U.S. natural-gas producer after Exxon
Mobil Corp. (XOM)--said two of Bronco's biggest shareholders,
collectively owning about 32% of the company's stock, have agreed
to tender their shares to the offer.
Buying Bronco, which provides contract land drilling to oil and
natural-gas exploration companies, will help Chesapeake get closer
to its goal of owning about two-thirds of the rigs it operates in
its drilling program, a philosophy it said was a key aspect of its
strategy. Bronco currently owns 22 drilling rigs operating mostly
in the Williston and Anadarko basins, including three under
contract with Chesapeake.
The acquisition "increases confidence in our plan to ramp up
drilling activities in highly lucrative, liquids-rich
unconventional resource plays," said Chesapeake Chief Executive
Aubrey McClendon.
The deal, which is expected to close in the second quarter, was
unanimously approved by both companies' boards of directors, and
Bronco said it recommends that shareholders accept the Chesapeake
offer.
Chesapeake has had improved results in recent quarters. In
February, it said it swung to a fourth-quarter profit, though
revenue declined on lower prices.
Shares of Chesapeake and Bronco closed at $32.65 and $10.40,
respectively on Thursday. Friday, Chesapeake shares were inactive
premarket and trading in Bronco shares have been halted.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855;
nathan.becker@dowjones.com