Gediminas Jasionis

Grey Wolf, Inc. (AMEX: GW) receives third acquisition offer from Precision Drilling Trust (NYSE: PDS)

by Gediminas Jasionis June 28, 2008
GW logoOn June 25, 2008, Precision Drilling Trust (NYSE: PDS) announced an offer to buy Grey Wolf, Inc. (AMEX: GW), at a price of $10 per share, representing a 6.6% premium to the prior day's closing price. This was the third proposal from Precision Drilling. The offer was rejected on Friday by Grey Wolf's board, as being inferior to another offer on the table. At the close on Friday, Grey Wolf's shares were at $8.78, while those of Precision Drilling were at $27.34.

From the perspective of Precision Drilling, their offer represents a long-term value creation opportunity. However Grey Wolf has another outstanding business combination agreement with Basic Energy Services Inc. (NYSE: BAS). Precision stated that their offer is only applicable to Grey Wolf alone and not the combined business.

With Grey Wolf's stock currently trades at $8.78, Precision's offer would appear to be considered generous.

GW chart

Considering that Grey Wolf also has another merger on the table, it is doubtful that the company would agree to Precisions offer. Without either merger the company operates at profit, although their income has been decreasing for the last year. A business combination should, however, provide the company with an increase in market share and would enable them to provide better and more cost effective services, which currently appears to be the only way to survive in the drilling markets.

About the company:

Grey Wolf, Inc. operates as a provider of onshore drilling services. The company operates in the United States oil and natural gas industry. Grey Wolf provides its services to independent oil and gas production companies. Currently the company operates approximately 121 land rigs.

Company's' balance sheet
Annoucement of Basic and Grey Wolf merger

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