11:39 DJS Seeing Value In Oil, Hicks, Muse Invests $250 Million In Coho Ene
11:39 DJS Seeing Value In Oil, Hicks, Muse Invests $250 Million In Coho Energy
DALLAS -(Dow Jones)- Exploring for undervalued investments,
leveraged-buyout firm Hicks, Muse, Tate & Furst plans to pay $250 million to
take control of fellow Dallas concern Coho Energy Inc.
The purchase by Hicks, Muse will build its stake in Coho to 62%, the
two concerns jointly announced Monday. Hicks, Muse already had a sizable
position in Coho. Earlier this year, the partners accumulated about 9.25% of
the company in a bet that oil and gas prices will rebound.
Hicks, Muse, like other investors, is on the hunt for undervalued
assets, and is finding them in the anemic independent oil and gas sector. The
long-term thinking is that energy demand has nowhere to go but up, and that
oil prices at some point will return to their normal trading range of $18 to
$20 a barrel.
Right now, they're under $14 a barrel, having plunged this year in the
wake of Asian economic turmoil, growth in exports by Iraq and overproduction
by some members of the Organization of Petroleum Exporting Countries.
Dallas-based Coho is an independent company that concentrates on
exploiting underdeveloped oil properties and exploration, mainly in Oklahoma
and Mississippi. The company is Mississippi's largest producer while its
natural-gas activities are mostly located in Louisiana.
Coho, which has about 25.6 million shares outstanding, plans to issue
41.6 million shares to Hicks, Muse, at $6 each. The initial share purchase
will be about 5.1 million shares, and the remaining shares will be issued
following a shareholder meeting in the fall, Coho said.
The $6 per-share price represents a premium over Coho's recent market
price. At midday monday, Nasdaq-listed shares of Coho (COHO) were up 50 cents
at $5.188.
"Because of the current weak oil price, we believe that there is
significant upside in the sector and that Coho Energy is an excellent vehicle
to enter this consolidating industry, as it presents a strong platform from
which to implement our buy-and-build strategy," said John Muse, chief
operating officer of Hicks Muse and one of the partners who purchased the Coho
stakeMuse.
Muse's comments echoed those he made in a May interview with The Wall
Street Journal. At that time, he told the Journal, "You look around the
marketplace today, and so many companies are fully priced. The energy sector,
though, looks to us like it has good relative value, mainly because of
depressed energy prices."
Coho plans to use the roughly $234 million in proceeds from the
transaction to repay debt. The company will also name two additional directors
from Hicks, Muse to its board, increasing the size of the board to nine and
the number of Hicks Muse directors to four.
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(:COHO) (:X.HIX)
08/24 11:39a CDT
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