Forestar Group Inc. (NYSE:FOR), a real estate and natural resources company, said it agreed to buy CREDO Petroleum Corp. (NASDAQ:CRED) for $14.50 per share.
Forestar would pay shareholders of CREDO $14.50 per share, a 33% premium to Friday's close of $10.86. The all cash transaction represents an equity purchase price of about $146 million.
Forestar has obtained a commitment for financing provided by Key Bank National Association that, combined with available liquidity, is sufficient to fund the acquisition.
Forestar intends to pursue amendments to its existing credit facilities to fund a significant portion of the purchase price. The transaction is subject to customary closing conditions, including approval by Credo's stockholders, and is expected to close in the second half of 2012.
Following the transaction, Forestar expects to maintain a solid balance sheet and ample liquidity. This acquisition is expected to be accretive to Forestar's earnings in the first full year of ownership.
The acquisition is expected to more than double Forestar's existing oil and gas production and proven reserves, provide Forestar with operating flexibility, and create a solid platform for continued growth.
After the close of the proposed transaction, Forestar would have meaningful ownership and operations in several strategic oil and gas formations including the Bakken and Three Forks, increased exposure to oil, and additional transparency and disclosure benefits.
Forestar has engaged Goldman Sachs as a financial advisor in connection with this transaction and Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel. Houlihan Lokey Financial Advisors, Inc. and Northland Capital Financial Services, LLC are acting as financial advisors to Credo, with Davis, Graham & Stubbs, LLP as legal counsel.
FOR is trading up 1.48% at $13 on Monday, while CRED trades 31.68% higher at $14.30. Providing quality reviews, articles and writings on crude oil, energy and gas online.
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