By David Wethe and Michael Bellusci
WPX fielded interest from several other companies in the months leading up to its all-stock shale-patch tie-up with Devon. That included a proposal from “Company C” at a Sept. 11 lunch meeting with WPX Chief Executive Officer Rick Muncrief, the filing shows. The offer would have been paid out in both cash and stock, valuing WPX at $6.20 a share. WPX closed at $4.33 that day.
Almost a week later, the WPX board and its advisers elected to go with Devon instead. The deal’s takeover premium was about 2.6% at the time of the announcement.
Low or zero-premium deals in the shale sector have become more commonplace amid shareholder pressure for mid-size companies to combine in order to cut costs and gain scale, but not to do so at any price.
WPX’s decision to reject Company C was driven in part by pressure from EnCap Investments LP, its largest investor, to merge with Devon, the filing shows. The WPX board was concerned Company C’s offer would mean accepting cash at a low point in the market for energy companies. The board also didn’t like “the insignificant ownership of WPX stockholders in the combined company and the consequent inability to have a meaningful influence on the future strategic direction of Company C,” according to the filing.
“The negotiations and number of parties involved in the process was not as extensive as we expected with four parties, including (Devon), discussing a merging with WPX,” Scott Hanold, an analyst at RBC Capital Markets, wrote Thursday in a note to investors, remarking on the filing.