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November 2014

Encana - Athlon deal in jeopardy

Posted by bernell on November 4, 2014

As some may recall, EnCana signed an agreement a few weeks ago to purchase Athlon Energy, Inc. for    Athlon Energy owns 140,000 acres of leases in the Permian Basin and when EnCana announced its plans to purchase Athlon it also announced plans to spend $1 billion in the Permian in 2015 to drill and develop those leases.

The deal was set to close on Friday, November 7.  Our write-up on this announcement can be found here:

Yesterday, November 3, EnCana announced the extension of that deal until midnight November 12 due to several separate stockholder lawsuits, including a state retirement fund, alleging the price being paid to Athlon shareholders is too low, among other things.

Here is an excerpt from EnCana's SEC filing about the lawsuits.

"The Complaints allege that the members of the Athlon Board breached their fiduciary duties to Athlon’s stockholders in connection with the Merger, and that the Merger Agreement contemplates inadequate and unfair consideration, was the product of an inadequate sales process and contains unreasonable deal protection devices that purportedly preclude competing offers. The Complaints further allege that Encana and, in the case of the Cambridge Complaint, Apollo Global Management, LLC, aided and abetted the purported breaches of fiduciary duty. The Phillips Complaint, the Rousseau Complaint and the Cambridge Complaint also allege that the Schedule 14D-9 filed by Athlon is materially misleading and/or fails to disclose material information necessary for a reasonable stockholder to make an informed decision regarding the Offer. The actions seek injunctive relief, including enjoining or rescinding the Merger, and an award of other unspecified attorneys’ and other fees and costs, in addition to other relief.

The outcome of these matters cannot be predicted with any certainty. A preliminary injunction could delay or jeopardize the completion of the Offer or the Merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the Offer or the Merger..."


What does this mean to the TMS? 

I don't know, but it might free up some capital to spend in the TMS if this deal falls through. 

Stay tuned!

What do you think about it?