Halliburton has walked away from last minute take-over talks with Expro, leaving Umbrellastream, a private equity group led by Candover and Goldman Sachs, to proceed with an offer of £1.81bn. Oil Energy Money covered Halliburton’s initial offer but believes a take-over by Umbrellastream is best for all all involved.
Halliburton was willing to pay £16.25, valuing the firm at £1.82bn, ten pence higher than Umbrellastream’s £16.15 offer, for the oil sea research firm. But their offer came with conditions-Expro would have to delay meetings with Umbrellastream and open the take-over to an auction process. Expro’s directors decided the deal, this year’s largest British leveraged buy out, was not worth the risk and rebuffed Halliburton. This has angered Expro shareholders, one of whom said: “Expro directors have a legal duty to sell the company at the highest price. This duty has clearly not been fulfilled.”
To understand why Expro would prefer a lower offer, the buy-out process must be understood. On Monday and Wednesday, Expro is scheduled to hold scheme of arrangement meetings in court for the Umbrellastream offer. A scheme of arrangement is a faster take-over strucure which reduces tax payments for both firms. Halliburton pulled their offer because Expro refused to cancel these meetings, but if the meetings are delayed for 14 days or more, Halliburton has said it may renew its offer. If the meetings proceed and the Umbrellastream take-over is approved, Halliburton will not have the chance to re-bid.
Halliburon is clearly fighting a war of contrition. By promising a higher offer and then walking away, it has piqued the interests of Expro shareholders, many of whom are already speaking to their lawyers about delaying the scheme of arrangement meetings. This delay could annoy Umbrellastream enough for them to pull their offer, which many analysts already consider over-priced. If Umbrellastream walk away, Expro is left with no formal offers and Halliburton can move in for a take-over on their terms.
Expro shareholders delaying the deal certainly seems short sighted. While Halliburton, as an oil services firm, may create more synergies in a horizontal merger with Expro than Umbrellastream, a private equity firm, investors should keep in mind that Halliburton has not made a formal offer after over three months of due dilligence. Their offer of £1.82 is only 1% higher than Umbrellastream’s and does not compensate the risks and delays inherent starting the take-over process from scratch.
Expro shares closed £16.77 on Friday as investors expected Umbrellastream to sweeten the deal or Halliburton to launch a new attack. A big risk, says Oil Energy Money, Expro shareholders should forget the ‘what-ifs’ and focus on closing a take-over that has already stretched on too long.
